FinCEN’s New AML Priorities: What You Need To Know
On June 30th, 2021, the United States Department of the Treasury’s Office of Financial Crimes Enforcement Network (FinCEN) issued its first ever set of national policy priorities for anti-money laundering and countering the financing of terrorism. These novel guidelines will reportedly act in accordance with the Anti-Money Laundering Act of 2020 (AML Act), meaning that once FinCEN creates regulations to implement these new priorities, financial institutions will be bound by the AML Act to incorporate them into their respective AML program(s). After lengthy consultation with U.S. regulators, national security bodies, and the attorney general’s office, these new regulations are expected to be developed over the course of the latter half of 2021. Among the more notable agencies consulted by FinCEN were the Office of Terrorist Financing and Financial Crimes (TFFC) and the Office of Intelligence and Analysis (OIA) – respective offices of the greater U.S. Office of Terrorism and Financial Intelligence (TFI) tasked with marshaling the Treasury Department’s enforcement, regulatory, and intelligence functions to close the various channels of financial support available to international terrorists, narcotics traffickers, and financial criminals.
The national AML/CFT Priorities FinCEN identified include a total of eight distinct categories listed as follows (in no noted order of importance): (1) Corruption; (2) Cybercrime, including cybersecurity and virtual currencies; (3) Foreign and domestic terrorist financing; (4) Fraud; (5) Transnational criminal organization activity; (6) Drug trafficking organization activity; (7) Human trafficking and human smuggling; and (8) Proliferation financing.1 The announcement promotes the realm of “corruption” to a national security interest – this given the destabilizing effects of corrupt activity, specifically in the political sphere, and its ties to illicit finance often of the multi-million dollar variety. Somewhat ironically, it will be the Biden administration that will now be using its authority to address the various ways that the United States is threatened by foreign bribery, misappropriation of public assets, and the like. Cybercrime considerations have also been highlighted on the priority list, with this activity referring to any use of computer or digital technology to assist in committing crimes.
While this is a very broad range of criminality, FinCEN pointed to cases of ransomware, where hackers steal information and then hold it for ransom as well as the use of virtual assets to launder proceeds of varying illicit activities. The bureau also notes convertible virtual currencies (CVC’s) are becoming ‘the currency of preference in a wide variety of online illicit activity,’ many of which have targeted financial institutions.1 FinCEN also made particular mention of Russia and other nations (such as North Korea) who have led major hacking and other interference efforts against the United States in the recent past, calling for U.S. financial institutions to update their policies and practices, as well as complete appropriate reporting of suspicious activity, to ensure vigilance against activity of this variety. While foreign terrorism exploits present considerable risks with respect to national security and the integrity of the U.S. financial system, FinCEN also addresses domestic terror financing aming their priorities. The regulatory body made note that racially and ethnically motivated extremists pose among the most “lethal” of domestic threats in todays highly contentious social climate.2 Human trafficking and smuggling – a trade growing in global reach and one gaining international attention – is also made a priority, which many would say is long overdue. FinCEN points out that these practices typically involve money laundering through multi-layered operations that often span across multiple jurisdictions. Logistics, housing, and transporting victims often involve legitimate purchases made with illegitimately earned money. This is something financial institutions should pay careful attention to. Finally, FinCEN refers to the concept of proliferation financing, which is loosely defined as the use of broker-dealers and shell companies to circumvent restrictions on the creation of nuclear weapons. Regardless of whether the individuals and/or companies in question are working to acquire the weapons themselves or helping to sponsor illegal nuclear programs, FinCEN claims that correspondent banking is the principal vulnerability and driver of proliferation in the United States.2 While financial institutions will not be expected to incorporate the priorities into their risk-based AML programs until FinCEN’s final implementing regulations are issued later this year, FI’s small and large would be wise to introduce these novel priorities to their compliance departments and personnel sooner rather than later to avoid falling behind with respect to eventual adoption of appropriate measures in early-2022. Citations 1. Alvarez-Mena, Sergio, et al. “FinCEN Issues First U.S. Priorities for Anti-Money Laundering and Counter-Terrorism Financing.” JD Supra, 9 July 2021.
2. Fornaris, Carl A., and Kyle R. Freeny. “FinCEN Identifies New Anti-Money