The Financial Crimes Enforcement Network (FinCEN) issued government-wide priorities for anti-money laundering and countering the financing of terrorism (AML/CFT) policy on June 30, 2021.
The priorities should assist financial institutions’ efforts to meet obligations under laws and regulations designed to combat money laundering and counterterrorist financing. Regulations that will specify how the priorities should be incorporated into risk-based AML programs will be issued at a later date.
The priorities are explained in detail below, in no particular order.
Corruption fuels instability and conflict, decreases faith in government, distorts economies and impacts democratic insitutions. FinCEN has issued advisories with respect to Nicaragua, South Sudan and Venezuela. These advisories, while focused on specific foreign jurisdictions, can help covered institutions comply with their BSA obligations by identifying typologies and red flags; however, the advisory notes these are not the only countries at risk for curruption.
Cybercrime, including relevant cybersecurity and virtual currency considerations
Cybercrime may include any illegal activity that involves a computer, another digital device or a computer network and includes threats such as social engineering.
The U.S. Treasury is particularly concerned about cyber-enabled financial crime, ransomware attacks and the misuse of virtual assets that exploit and undermine their innovative potential. FinCEN has issued multiple advisories regarding ransomware and COVID-19-related cybercrime, as well as imposter scams and money mule schemes related to COVID-19.
In 2019, FinCEN issued an advisory to help covered institutions identify and report suspicious activity concerning how criminals and other bad actors exploit convertible virtual currencies. In 2016, FinCEN issued an advisory with respect to cybercrime that set out typologies and red flags for covered financial institutions’ BSA/AML compliance and cybersecurity units and encouraged greater cooperation between those units.
In addition, FinCEN issued a fact sheet to encourage covered institutions to share information with one another under a safe harbor provision of the BSA that offers protections from civil liability. The Office of Foreign Assets Control also issued an advisory in late 2020 highlighting the sanctions risks associated with ransomware payments related to malicious cyber-enabled activities.
Foreign and domestic terrorist financing
Preventing financing to recruit and support members, fund logistics and conduct terrorist operations is critical in combating foreign and domestic terrorism. On June 15, 2021, the National Strategy for Countering Domestic Terrorism issued highlights of the ongoing threat to Americans posed by domestic terrorism. Filing SARs on potential terrorist financing transactions and reporting violations that require immediate attention should be a top priority for financial institutions.
In 2015 and 2018, the U.S. Treasury raised awareness of the issue by publishing a National Terrorist Financing Risk Assessment and addressed the associated vulnerabilities in the 2020 National Strategy. Countermeasures to risks include complying with required sanction programs and being aware of terrorists and terrorist organizations included in the sanctions lists issued by the U.S. government.
No one is surprised that the type of risk generating the largest share of illicit proceeds in the United State is fraud risk. Proceeds from fraudulent activities are laundered through a variety of methods, including offshore legal entities and money mules, and may include schemes such as romance scams and various forms of identity theft.
FinCEN has issued several fraud-related advisories, in particular with respect to business email compromise and COVID-19. FinCEN also issued information on key terms and filing instructions regarding filing SARs for fraudulent activities, crimes and cyber and ransomware attacks related to COVID-19.
Transnational criminal organization activity
Transactional criminal organizations (TCOs) are incresingly turning to professional money laundering networks that receive a fee or commission for their laundering services and often use their specialized expertise to launder proceeds generated by others. The U.S. Treasury has noted that a number of TCOs operate in the United States, including Russian and Mexican TCOs, as well as certain Africa- and Asia-based TCOs.
Drug trafficking organizational activity
The proceeds from the sale of illicit drugs are laundered in or through the United States. Drug trafficking organizations rely more on professional money laundering networks, and there has been a substantial increase in complex schemes to launder proceeds. In 2019, FinCEN issued an advisory related to the trafficking of fentanyl and other synthetic opioids.
Human trafficking and human smuggling
Human trafficking and human smuggling networks move illicit proceeds in a variety of ways, ranging from cash smuggling by individual victims to sophisticated cash smuggling operations. In 2014, FinCEN issued an advisory identifying financial and behavioral red flags of human trafficking and financial red flags associated with human smuggling, with a supplemental adivory issued in 2020.
Proliferation financing refers to the act of providing funds or financial services that are used, in whole or in part, for the manufacture, acquisition, possession, development, export, trans-shipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and their means of delivery and related materials (including both technologies and dual-use goods used for nonlegitimate purposes) in contravention of national laws or, as applicable, international obligations.
Covered institutions must comply with sanctions programs and are encouraged to consult the multiple advisories issued by the U.S. Treasury and FinCEN with respect to jurisdictions with AML/CFT and counterproliferation deficiencies for additional information regarding the risk of proliferation finance.
How Wipfli can help
While respective regulations regarding the advisories have not been promulgated, Wipfli can be your partner in helping your financial institution draft appropriate policies and procedures to ensure compliance. Contact us to learn more.
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