To combat rising online child sex exploitation, FinCEN issues new SAR filing instructions

Online child sexual exploitation (OCSE) crimes are on the rise, and the Treasury’s top enforcement unit is highlighting some financial trends related to the crimes, the agency said in a notice issued Thursday.

Additionally, the notice from the Treasury’s Financial Crimes Enforcement Network (FinCEN) said it was providing financial institutions with specific suspicious activity report (SAR) filing instructions to deal with the increase in OCSE.

“Crimes related to OCSE, including the funding, production, and distribution of child sexual abuse materials (CSAM), have increased during the COVID-19 pandemic, according to multiple law enforcement authorities,” FinCEN said in its notice.

The agency said the increase was due to a number of factors merging, including: increased Internet usage by children who are spending more time online, restricted travel during the COVID-19 pandemic resulting in more sex offenders being online; and increased access to and use of technology, including encrypted communications, bulk data transfer, cloud storage, live-streaming, and anonymized transactions.

A review of SARs, the agency said, also showed some trends, including: from 2017 to  2020, there was a 147% increase in OCSE-related SAR filings, including a 17% year-over-year increase in 2020. FinCEN said it also observed that OCSE offenders are increasingly using convertible virtual currency (CVC) (some of which provide anonymity), peer-to-peer mobile applications, the darknet, and anonymization and encryption services to try to avoid detection.

“CVC in particular is increasingly the payment method of choice for OCSE offenders who make payments to websites that host CSAM,” FinCEN said. Finally, the agency said it found that OCSE facilitators attempt to conceal illicit file sharing and streaming activities by transferring funds via third-party payment processors.

SAR filing instruction changes made by FinCEN in response to the uptick in OCSE actions include:

  • Financial institutions reference only this notice in SAR field 2 (Filing Institution Note to FinCEN) using the keyword OCSE-FIN-2021-NTC3. “This keyword should also be referenced in the narrative to indicate a connection between the suspicious activity being reported and the activities highlighted in this notice,” FinCEN said. “Financial institutions may highlight additional advisory keywords in the narrative, if applicable.”
  • Financial institutions should also select SAR field 38(z) (Other) as the associated suspicious activity type to indicate a connection between the suspicious activity reported and OCSE activity and include the term “OCSE” in the text box. “If known, enter the subject’s internet-based contact with the financial institution in SAR Field 43 (IP Address and Date),” the agency said.
  • If human trafficking or human smuggling are suspected in addition to OCSE activity, financial institutions should also select SAR field 38(h) (Human Trafficking) or SAR field 38(g) (Human Smuggling), respectively.
  • Reporting entities should use the Child Sexual Exploitation (CSE) terms and definitions in the appendix of the notice when describing suspicious activity, which FinCEN said would assist its analysis of the SARs.

FinCEN Calls Attention to Online Child Sexual Exploitation Crimes