The Association of Certified Anti-Money Laundering Specialists (ACAMS) has released the results of a study surveying a total of 340 financial and compliance professionals, as well as financial crime experts and even government officers located across the globe. The survey, conducted in the fall of 2020 following a proposal brought forth by the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN) prior to the ultimate passing of the National Defense Authorization Act (NDAA), sought to obtain distinct feedback from financial institutions on their perspectives and priorities in order to better shape future legislation. The release of these results early last week have provided regulators, lawmakers and those operating across the financial sector with insight into the current state of anti-money laundering and items on the agenda to revolutionize current AML rules.

A key takeaway from the results of the survey is that financial institutions need more clarity on behalf of government regulators when it comes to the general rules and guidelines surrounding money laundering and terrorism financing. This includes specific details of what constitutes a truly effective compliance program; with firms also seeking increased information-sharing capacity between the public and private sectors. At the moment, the majority of compliance officers and staff members surveyed believe that their expectations in this regard are neither precise nor concrete. This leads to many in the industry viewing regulators as acting arbitrarily in their application of the regulations. FinCEN has proposed making a change to the formal definition of an “effective and reasonably designed” AML compliance program to contain three core elements and objectives that include the assessment and management of risk, compliance with BSA requirements, and the reporting of information with a high degree of usefulness to the government. According to the survey, over 60% of respondents believe these elements adequately cover their respective industries, but an additional 61% did acknowledge that additional guidance is needed from the government agency to better comprehend this definition. 

While FinCEN was well aware of the confusion surrounding their proposed definition revamp prior to these poll results being released, the agency was also working to establish clearer guidelines on what law enforcement is looking for when it comes to other elements of compliance, including mending inefficient suspicious activity report (SAR) filing protocols. Under the NDAA, the Treasury will seek to evaluate how it might streamline SAR and currency transaction reporting (CTR) requirements and processes moving forward, possibly altering and reporting thresholds and as such, reducing some of the unnecessary costs and the overall burden placed on today’s financial institutions. Altogether, the vast majority of individuals surveyed called for increased feedback from FinCEN with respect to SAR filings under these updated AML rules. 63% of respondents believe there is a reporting time-lag which has limited the effectiveness of suspicious activity reporting regimes overall to date¹, a process that could be improved with more timely oversight. Others have called for a SAR reporting system that allows for the sharing of additional SAR data among peer institutions, which would effectively increase the value of these reports to law enforcement bodies seeking to enforce potential improprieties.¹ With a 79% approval rating, respondents were also overwhelmingly welcome to receiving more generalized periodic reports from government agencies that outline AML priorities that their institutions could subsequently apply to their own compliance programs. 

Another interesting discovery from the ACAMS survey was that many in the financial industry view the notorious “FinCEN Files” leak in something of a positive light.  One of the major international stories of 2020, the Financial Crimes Enforcement Network (FinCEN) became the victim of a massive leak of thousands of highly confidential financial documents (including thousands of SARs) that ultimately ended up in the hands of over 400 journalists across the globe. These documents revealed gross negligence on behalf of global banks in maintaining adequate AML checks, allowing for financial criminals, foreign diplomats, politically exposed persons (PEPs) and a variety of other suspect parties to move millions upon millions of dollars in laundered cash across international borders in spite of a number of easily identifiable red flags being present. Somewhat surprisingly, 43% of compliance specialists polled viewed the leak as having a net-positive impact on efforts to fight financial crime around the world, likely leading to increased regulatory scrutiny of financial institutions for years to come (which could translate to improved detection rates for financial crime). Those surveyed believe other positive changes that could arise from this scandal could include an increase in defensive SAR filings as well as an increased number of financial institutions voluntarily enhancing their anti-money laundering (AML) compliance programs to avoid civil money penalties and reputational damage. 

“The findings of the ACAMS Compliance Effectiveness and Risks Survey are clear: compliance professionals see a need for supervisors and law enforcement officials to do more to help them fight financial crime”,² said Scott Liles, ACAMS president and managing director. “While existing regulations are viewed by and large as being sufficient for the traditional banking sector, further guidance and greater feedback are much in demand. Interestingly, the responses indicate that recent advances in technology are seen as posing as much of a threat as promise.”² While the sample size of the survey is miniscule in comparison to the number of financial and government officials tied to the financial sector operating across the United States and foreign jurisdictions, there is clearly a widespread sentiment that the government will have to take a more active role in efforts to improve anti-money laundering legislation and follow-through in the months to come. This means regulators working proactively to provide useful feedback and tools and providing clear guidelines to ensure compliance rather than simply waiting for violations to occur and handing out fines for slip-ups. Clearly many in the industry feel that the FinCEN Files leak was the catalyst that was needed for things to change, and time will tell what the scandal’s true impact on future financial legislation will end up being. 

Weekly Roundup

UK Limits Watchdog’s International Powers

In something of a puzzling decision in a country synonymous with a steady influx of dirty money from overseas parties, the UK’s Supreme Court recently placed a limit on their national economic crimes investigative agency that will hamper their ability to collect pertinent information on foreign entities moving forward. The Serious Fraud Office (SFO) – a government department responsible for investigating and prosecuting serious and complex fraud and corruption in England, Wales and Northern Ireland – was essentially forced to surrender its power to compel the production of evidence without formal judicial approval from foreign companies with documents held abroad. Since its establishment in 1987, the SFO has been allowed to compel witnesses to testify and provide information to be used as evidence for related cases without having prior court approval, a process often referred to as serving a “section 2 notice.” The Supreme Court ruled the use of section 2 powers to obtain evidence from overseas entities as unlawful given that UK laws do not extend extraterritorially.⁵ 

The decision will now force the Office to rely heavily on the far less-efficient process of securing mutual legal assistance to facilitate gathering evidence for overseas investigations, requiring requests for information to be routed through judicial and diplomatic channels to counterparts in other countries.⁵ While the decision will help avoid any abuses of power by the SFO with respect to foreign companies moving forward, time will tell what effect this decision plays on the number of prosecutions brought about for fraud and corruption in the region moving forward. 

SEC Head Overturns Trump-Era Investigatory Staffing Decision

Early last week, Allison Herren Lee – the acting head of the Securities and Exchange Commission (SEC) – moved to reverse a controversial decision made under the Trump administration. The move saw Lee officially expand the number of senior officials of the regulator’s Enforcement Division authorized to issue formal orders of investigation from two to thirty-six in total. In issuing a formal order of investigation, the SEC has the power to subpoena various entities for records and/or testimony to aid in the accrual of tangible evidence to propel potential cases. Analysts have speculated that the move may be foreshadowing of a possible uptake in cases and subsequent enforcement actions taken against bad actors under the Biden administration. A total of 405 stand-alone enforcement actions were taken by the SEC in the fiscal year 2020, the lowest total of said actions since 2015. While the ongoing COVID-19 pandemic and the growth of remote operations likely played a role in this decline, the SEC is expected to ramp up their efforts now that an increased sense of societal normalcy has for the most part returned. 

In a statement released following the decision’s announcement, Lee noted “this delegation of authority will enable investigative staff to act more swiftly to detect and stop ongoing frauds, preserve assets, and protect vulnerable investors”,⁴ while lauding the investigative capacity of the experienced senior officers employed by the watchdog. Time will tell how the move will play out for the SEC for the fiscal year 2021, but one might expect the gross enforcement action total to increase exponentially given these expanded powers. 

Regulator: Australia’s Crown Resorts Unfit for Gambling License

A prominent casino and gaming industry regulator recently published a report examining Crown Resorts Ltd – Australia’s largest gaming and entertainment group – casting doubt on whether the company is suitable to hold a gambling license for its new $1.7 billion Sydney-based resort. Crown has long been synonymous with illicit activity, as reports over the last several years have tied the group to organized crime and other illegitimate activities. Despite the company vehemently denying these reports, the allegations ultimately led to the Independent Liquor and Gaming Authority (ILGA) suspending the gambling license previously granted to Crown’s new facility several years ago following testimony from Crown executives acknowledging that illicit financial activity was taking place in their casinos. The novel report further compounds the controversy surrounding the gaming giant, as a year-long inquiry into the group led by the New South Wales state gambling regulator revealed additional claims of improprieties including money laundering and widespread governance failures. 

Following the investigation’s completion, the head of the inquiry, Patricia Bergin, wrote “any applicant for a casino license with the attributes of Crown’s stark realities of facilitating money laundering, exposing staff to the risk of detention in a foreign jurisdiction and pursuing commercial relationships with individuals with connections to Triads and organized crime groups would not be confident of a positive outcome.”³ Bergin also called for sweeping changes to be made to Crown’s leadership moving forward in order to adopt a proactive approach to resolving their longstanding issues. Crown said it was considering the report, and agreed to work with the ILGA in relation to its findings and recommendations.³ 

Citations

• “ACAMS Compliance Effectiveness and Risks Survey.” Association of Certified Anti-Money Laundering Specialists | ACAMS, Feb. 2021. 
• Kaur, Lashvinder. “Financial Institutions Say Governments Must Take More Active Role in AML Efforts to Improve Effectiveness: ACAMS Survey.” Nasdaq, 10 Feb. 2021. 
• Kaye, Byron. “UPDATE 3-Australia’s Crown Resorts Unfit for Sydney Gambling Licence – Report.” Reuters, Thomson Reuters, 9 Feb. 2021. 
• Nicodemus, Aaron. “SEC Expands Number of Staffers Authorized to Launch Investigations.” Compliance Week, 9 Feb. 2021. 
• Tokar, Dylan. “U.K. Court Limits Corporate Watchdog’s Cross-Border Powers.” The Wall Street Journal, Dow Jones & Company, 5 Feb. 2021.