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Author: Don Obrien

FinCEN Identifies First National AML/CFT Policy Priorities – Finance and Banking



United States:

FinCEN Identifies First National AML/CFT Policy Priorities


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Earlier this summer, the Financial Crimes Enforcement Network
(“FinCEN”) issued national priorities for the anti-money
laundering and countering the financing of terrorism
(“AML/CFT”) policy (the “Priorities”).1

The Priorities were issued pursuant to Section 6101(b)(2)(C) of
the Anti-Money Laundering Act of 2020 (the “AML
Act”)2 after
consultations with relevant Department of the Treasury offices, the
Attorney General, federal and state regulators, and relevant law
enforcement and national security agencies. FinCEN intended to
establish national priorities to govern AML/CFT policy, applicable
to both bank and non-bank financial institutions (collectively,
“Covered Institutions”).

The Priorities, identified by FinCEN in no particular order, are
as follows:

  1. Corruption. The Priorities emphasize that
    countering corruption is “a core national security interest of
    the United States,” with a particular focus on political
    corruption and misappropriation of public assets and bribery.

  2. Cybercrime, including relevant cybersecurity and
    virtual currency considerations.
    The Priorities define
    cybercrime broadly as any illegal activity that involves a
    computer, another digital device, or a computer network. The
    Priorities highlight the need to combat ransom-related activity,
    which has targeted various sectors, including finance, government,
    education, energy, and health care. The Priorities also note that
    convertible virtual currencies have become the preferred method to
    pay for illicit goods and drugs, and for buying ransomware tools
    and services.

  3. Foreign and domestic terrorist financing. The
    Priorities discuss both foreign and domestic terrorist financing,
    while emphasizing that domestic terrorism is an evolving risk area
    and an “ongoing threat to Americans.” The Priorities
    state that the most lethal domestic violent extremist threats come
    from “racially or ethnically motivated violent
    extremists.”

  4. Fraud. The Priorities state that fraud
    schemes, such as bank, consumer, health care, securities and
    investment, and tax fraud, are believed to generate the largest
    share of illicit proceeds in the U.S., while highlighting that new
    internet-enabled schemes, such as romance scams, are on the rise.
    COVID-19 related fraud schemes are also being aggressively pursued,
    to include economic impact payment, unemployment insurance,
    counterfeit COVID-19 vaccine, pump-and-dump and other market
    manipulation schemes.

  5. Transnational criminal organization activity.
    FinCEN identified transnational criminal organizations, including
    drug trafficking organizations (“DTOs”), as priority
    threats due to the crime-terror nexus and their engagement in a
    wide range of illicit activities, including cybercrime, drug
    trafficking, fraud, wildlife trafficking, human smuggling, human
    trafficking, intellectual property theft, weapons trafficking and
    corruption.

  6. Drug trafficking organization activity. The
    Priorities explain that DTOs have contributed to a significant
    public health emergency. FinCEN has seen an increase in complex
    schemes to launder proceeds of drug sales by facilitating the
    exchange of cash from Mexican DTOs to Chinese citizens living in
    the U.S.

  7. Human trafficking and human smuggling. FinCEN
    acknowledged two previously issued advisories that identified
    financial and behavioral red flags of human trafficking and human
    smuggling. The Priorities highlight that the illicit proceeds of
    human trafficking can include income associated with housing,
    transportation, and exploitation of victims.

  8. Proliferation financing. The Priorities define
    proliferation financing as the act of providing funds or financial
    services used for the manufacture, acquisition, possession,
    development, export, trans-shipment, brokering, transport,
    transfer, stockpiling or use of nuclear, chemical or biological
    weapons, in violation of national laws or international
    obligations. FinCEN states that global correspondent banking is a
    main vulnerability and driver of proliferation financing risk
    within the U.S. due to its central role in processing U.S. dollar
    transactions.

Impact of the National AML/CFT Priorities

In addition to the Priorities, FinCEN published two related
statements to Covered Institutions providing further guidance on
how to approach the Priorities.3 The statements clarify that the
Priorities do “not create an immediate change to Bank Secrecy
Act (“BSA”) requirements or supervisory
expectations” for Covered Institutions. Rather, FinCEN and the
regulators will revise the BSA regulations within 180 days to
address how the Priorities will be incorporated into the BSA
requirements.

Until the effective date of the new regulations, FinCEN
recommends that Covered Institutions begin to evaluate how to
incorporate the Priorities into their compliance programs, such as
by assessing potential risks associated with customers they serve,
the products and services they offer, and the geographic areas
where they operate.

As required by the AML Act, FinCEN will update the Priorities to
account for new or evolving AML/CFT threats at least once every
four years.4

Footnotes

1. Department of the
Treasury Financial Crimes Enforcement Network, Anti-Money
Laundering and Countering the Financing of Terrorism National
Priorities
(June 30, 2021), https://www.fincen.gov/sites/default/files/shared/AML_CFT%20Priorities%20(June%2030%2C%202021).pdf.

2. The AML Act was enacted
as Division F, §§ 6001-6511, of the William M. (Mac)
Thornberry National Defense Authorization Act for Fiscal Year 2021,
H.R. 6395, 116th Cong. (2021) (enacted) (enrolled bill available at
https://www.govinfo.gov/content/pkg/BILLS-116hr6395enr/pdf/BILLS-116hr6395enr.pdf).

3See Department
of the Treasury Financial Crimes Enforcement Network,
Interagency Statement on the Issuance of the Anti-Money
Laundering/Countering the Financing of Terrorism National
Priorities
(June 30, 2021), https://www.fincen.gov/sites/default/files/shared/Statement%20for%20Banks%20(June%2030%2C%202021).pdf;
See also, Department of the Treasury Financial Crimes
Enforcement Network, Statement on the Issuance of the
Anti-Money Laundering/Countering the Financing of Terrorism
(AML/CFT) National Priorities
, (June 30, 2021), https://www.fincen.gov/sites/default/files/shared/Statement%20for%20Non-Bank%20Financial%20Institutions%20(June%2030%2C%202021).pdf.

4. 31 U.S.C. §
5318(h)(4)(B) (as amended by AML Act §
6101(b)(2)(C)).

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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