Top FinCEN National AML / CFT Priorities Outline Key Threats – Criminal Law
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On June 30, 2021, the United States’ Financial Crimes Enforcement Network (FinCEN) released its first government-wide anti-money laundering and terrorist financing (LAB / CFT) policy priorities. (the priorities “).
Priorities were issued pursuant to Section 6101 (b) (2) (C) of the Anti-Money Laundering Act 2020 (the “AMLA”), which required the Secretary of the Treasury, in consultation with the Attorney General, federal and state regulators, and relevant national security and law enforcement agencies – to establish and publicize national priorities for governing AML / CFT policy.1 Under the AML, examiners will be required to assess whether financial institutions appropriately integrate the Priorities into their risk assessments and general AML / CFT compliance programs.
The priorities, defined by FinCEN in no particular order, are:
- Cybercrime, including cybersecurity and convertible virtual currencies (CVC)
- Financing of foreign and domestic terrorism
- Transnational criminal organization activity
- Organizing drug trafficking activity
- Human trafficking
- Financing proliferation
Within 180 days of prioritization, FinCEN will adopt regulations to ensure that covered institutions incorporate the priorities into their AML / CFT compliance programs. Before these rules are adopted, they will be subject to a period of notice and comment which will allow the constituencies concerned to express their views.
While it is too early to predict what the regulatory requirements will be when they are released in their final form, and as FinCEN has recognized, “not all priorities will be relevant for every institution covered”, the priorities are an indication of areas of potential risk that FinCEN and banking regulators will expect institutions to address when they update their risk assessments and, ultimately, make changes to their reporting programs and procedures. LBC.
Below, we provide a brief overview of some of the most important priorities and observations regarding what Covered Financial Institutions can do now to prepare for upcoming proposals and possibly future implementing regulations.
TO TAKE AWAY AND RECOMMENDATIONS
- While the prioritization isn’t meant to be meaningful, it’s hard not to notice that corruption is first on the list. This primary placement is in line with the Biden administration’s recent National Security Study Memorandum and its stated goal of establishing anti-corruption as a fundamental US national security interest. It also reflects AMLA’s inclusion of the Kleptocracy Asset Recovery Rewards Act, which makes eradicating corruption from foreign governments a priority for the Treasury Department. In light of these considerations, Covered Institutions that process cross-border payments will need to be particularly vigilant to ensure that this risk is analyzed and taken into account, in particular in the context of operations in countries and industries. activity historically affected by official corruption.
- The inclusion of domestic terrorism, particularly racially or ethnically motivated violent extremists (RMVE) and anti-government and anti-authority extremists, reflects a focus that is more specific to domestic sponsors of terrorism than has traditionally been the case. case. In the aftermath of the terrorist attacks of September 11, 2001, the USA PATRIOT Act resulted in the imposition of Know Your Customer (KYC) and transaction monitoring protocols targeting international organizations seeking to commit acts of terrorism in the United States and elsewhere. . More recent events have highlighted the role of RMVEs in acts of domestic terrorism, and by including these entities in its priorities, FinCEN likely expects covered institutions to provide transaction monitoring and SAR capability ( suspicious activity report) on transactions involving customers who are members or otherwise affiliated with such organizations. This can lead to new risk considerations and calls for judgment for covered institutions when, for example, the United States does not list an RMVE as a terrorist organization but another country does.2
- Transnational criminal organizations (TCOs), including drug trafficking organizations and human trafficking networks, remain top priorities for FinCEN and other government stakeholders. Notably, the priorities highlight typologies in these categories that have recently gained the attention of law enforcement agencies, including professional money laundering networks that provide money laundering services for some. TCOs based in Africa and Asia which have gained prominence, as well as as TCOs who engage in foreign election interference and attempt to stir up social unrest. Financial institutions should take steps to assess their risks accordingly.
- FinCEN has explicitly recognized that not all priorities will be relevant for every institution covered, but it will likely be difficult for FinCEN to clearly establish the types of institutions covered or which transactions may not be affected by a priority. particular. Accordingly, financial institutions should be prepared to document, through their risk assessment process, the decision-making as to why and why a particular priority is not a relevant risk to be considered. counts in its risk-based AML program.
- Unsurprisingly, given AMLA’s extension of the Banking Secrecy Act (BSA) to CVC and the significant increase in popularity of CVC over the past year, CVC transactions have featured on the market. FinCEN priority list. The priorities underscore the complexity presented by the continuing evolution of CVC. On the one hand, CVCs are evolving and thriving in response to market demands for fast, efficient and secure ways to conduct financial transactions. On the other hand, the lack of transparency inherent in many CVC transactions makes it difficult for financial institutions to understand the parties involved in a transaction as well as its underlying purpose. As financial institutions increasingly embrace CVCs (reluctantly or not) and face clients who, for example, have significant wealth related to cryptocurrency, the policies, procedures and controls regarding usage illicit CVCs should also be integrated into AML / CFT systems. as in the governance around the approval of new products and services associated with CVC. This is an area that is likely to be one of the most complicated in terms of future regulations. Covered institutions will be well served to monitor proposals and fully participate in the feedback process.
1 Our full summary of the AMLA is available here.
2 For example, in February 2021, Canada added three right-wing groups to its list of terrorist entities, including the Proud Boys, founded in the United States by a Canadian citizen. See Canadian section of Proud Boys, designated as terrorist group by government, says it has “disbanded” Washington post, March 3, 2021.
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