A&S World Trading FinCEN $275,000 Penalty: First Geographic Targeting Order Enforcement Action

On 1 April 2022, the Financial Crimes Enforcement Network (FinCEN) announced a $275,000 civil money penalty against A&S World Trading, Inc., which traded as Fine Fragrance, a perfume store in Los Angeles. FinCEN's press release describes it as the agency's first enforcement action for failing to comply with a Geographic Targeting Order (GTO). The case is a good reminder that anti-money laundering (AML) obligations are not limited to banks. A cash-heavy retailer that ignored a targeted reporting order ended up with a penalty from the same regulator. The facts below come from FinCEN's consent order (No. 2022-02) and its press release.

What a Geographic Targeting Order is

A GTO is an order that temporarily lowers or changes reporting requirements for businesses in a defined area where FinCEN sees elevated money laundering risk. The Los Angeles Fashion District GTO was issued on 26 September 2014 and covered a 180-day period from 9 October 2014 to the close of business on 6 April 2015. Its geographic area was a defined part of downtown Los Angeles, and it applied to trades and businesses there, including garment and textile stores, transportation companies, travel agencies, perfume stores, electronic stores, shoe stores, lingerie stores, flower stores, beauty supply stores and stores with Import or Export in their names.

Covered businesses had to report currency in excess of $3,000 received in one transaction, or in two or more related transactions within 24 hours, on FinCEN Form 8300, filed electronically through the Bank Secrecy Act E-filing system with the identifier LAGTO2014 in the comment field. They also had to check customer identification, obtain a written statement on whether the customer was acting for someone else, record phone numbers, and keep records for five years from the last day of the order period. Our guide to Form 8300 for accounting firms covers the standard cash reporting rules that sit underneath orders like this one.

The business and the violations

According to the order, A&S owned and operated Fine Fragrance, a perfume store at 501 East Olympic Boulevard in Los Angeles. It was a California corporation, largely cash-based, with both retail and wholesale sales, and about 85 percent of its sales were wholesale. A&S received the GTO by certified mail on 15 October 2014.

FinCEN found that after receiving the order, A&S processed $4,646,211 in sales involving currency and filed none of the required reports. The Internal Revenue Service (IRS) identified 114 unreported transactions or groups of transactions, totalling approximately $2,330,000. The press release summarises this as more than $2 million in high-risk currency transactions that went unreported.

Late and incomplete filings

Filing after the IRS examination did not cure the problem. The order says the reports A&S later submitted lacked required information such as customer details, and some were mailed to the wrong agency rather than filed in the required electronic format. The order states that the completed forms have not been filed in the correct format. A report that arrives late, in the wrong place or without the customer information it exists to capture does little for the investigators who rely on it.

Willfulness, aggravating factors and mitigation

FinCEN found the violations willful, which under the civil Bank Secrecy Act standard includes reckless disregard or willful blindness. It cited the systemic nature of the failures, management's failure to act, and the lack of prompt corrective action after the IRS identified the problems. On the other side, FinCEN noted that A&S cooperated substantially, provided timely and organised materials, and signed tolling agreements. It did not voluntarily disclose the violations, which were found by the IRS.

The order records that Antonio Campos, A&S's former owner and chief executive, agreed to assume the company's liability and pay the $275,000 penalty. He also agreed to cooperate fully with FinCEN, provide requested records and retain required records for six years. The press release thanks the IRS Small Business/Self-Employed Division for its assistance.

Lessons for businesses and advisers

For a cash-intensive business, the first lesson is to have someone who owns regulatory notices. The GTO arrived by certified mail, and the order describes management's failure to act as an aggravating factor. Second, build the reporting step into the point of sale: the data FinCEN asked for, including identification and whether the buyer was acting for another person, has to be collected while the customer is present. Third, if a mistake is found, correct it in the right format and to the right agency, because partial fixes were counted against A&S. Advisers who work with cash-based clients can pair this case with our guide to cash-intensive business clients and AML risk, and with the Learnsignal CPD courses for structured training.

The second lesson for advisers is about risk assessment. The Fashion District order named perfume stores and import and export businesses in a specific area, which is the kind of local typology an adviser can use when judging a client's exposure. A client in a covered category, handling large amounts of cash and wholesale buyers, deserves a closer look at how it records and reports cash receipts.

What we could not confirm

The signature dates in the text of the order we read were blank, so we use the release date of 1 April 2022, which FinCEN says follows an assessment on 31 March. The press release says A&S failed to comply, while the order says the former owner agreed to assume and pay the penalty, and we have reported both. We have not reviewed the IRS examination file or the correspondence between A&S and FinCEN, and we cannot say what filings the business has since made.