On June 30, 2021, FinCEN issued priorities for anti-money laundering and countering the financing of terrorism (AML/CFT), pursuant to the Anti-Money Laundering Act of 2020.
The priorities describe the most prevalent and significant AML/CFT risks the United States is facing at this time.
FinCEN also issued the Interagency Statement on the Issuance of the Anti-Money Laundering/Countering the Financing of Terrorism National Priorities and a similar statement for non-bank financial institutions. These statements provide guidance to covered institutions on how to address the priorities.
How did FinCEN develop the priorities?
To develop the priorities, FinCEN worked with various stakeholders and considered a vast array of information. FinCEN stated it will continue to consult with various agencies and offices and intends to update the priorities every four years to address emerging or new threats to national security and the U.S. financial system.
What do the FinCEN priorities address?
The priorities identified include the following:
- Human trafficking and human smuggling use multiple means to move illicit funds, including the movement of cash by individuals as well as use of criminal and money laundering networks. FinCEN has issued advisories noting behavioral and financial red flags associated with these crimes.
- Fraud, such as tax fraud, bank fraud, consumer fraud, healthcare fraud and securities/investment fraud, generate the largest share of illegal proceeds in the United States. Fraud in the form of internet-based schemes like romance scams and various forms of identity theft have been increasing. Perpetrators of these crimes use various methods to launder funds.
Several fraud advisories have been issued by FinCEN; six in particular were related to COVID-19 schemes. In addition, foreign intelligence entities employ tactics to gain access to sensitive information, intellectual property, technology and even individuals.
- Cybercrime is illegal activity involving computer networks, computers or other digital devices. This area is ever-growing and far-reaching. Individuals, businesses and the financial industry are targets of those involved in this illegal activity. Cybercriminals hope to disrupt business operations and obtain access to sensitive data — as well as the finances of others — through their crimes. Individuals are often targeted and used as unknowing pawns in the criminal’s games.
- Corruption fuels instability and conflict and undermines economic growth. It can also lead to many challenges, including human rights abuses, and has a disproportionate impact on the poor and vulnerable. Corruption threatens the national security of the United States and the global financial system, degrades the rule of law, deprives innocent civilians of fundamental human rights and perpetuates conflict.
Human rights abuses have been addressed in prior advisories from FinCEN. These advisories can assist covered institutions in complying with BSA/AML requirements by helping to identify red flags for these areas.
- Domestic and international terrorist financing includes complex schemes and networks that may be embedded within existing money laundering methods used to support logistical networks, operatives and the procurement of material, as well as individuals acting alone using small amounts of money to self-fund attacks.
The most common type of international terrorism involves individuals who knowingly provide funds to overseas terrorists or terrorist groups or their supporters abroad. These groups still rely primarily on banks, cash couriers and money services businesses to transfer funds.
Domestic terrorism is carried out by racially or ethnically motived violent extremists (RMVEs) and militia violent extremists (MVEs) who primarily advocate for the superiority of the white race. RMVEs and MVEs pose the biggest and most lethal of the domestic violent extremist threats.
To assist in the counteraction of the potential risks related to terrorist financing, covered institutions must comply with required sanctions programs as part of their risk-based AML programs and should be aware of terrorists and terrorist organizations that are included on sanctions lists issued by the U.S. government.
- Proliferation financing uses front companies or brokers to exploit the U.S. financial system to move funds that will be used to either develop state-sponsored weapons-related programs or obtain weapons of mass destruction (WMD). Actors engaged in the proliferation of WMDs have developed sophisticated ways to finance their programs.
Both the U.S. Treasury and FinCEN have released advisories for these activities, and covered institutions are encouraged to review the information contained in those advisories. Covered institutions must comply with sanctions programs and, as part of a risk-based AML program, should also be aware of economic and trade sanctions issued by the federal government, such as OFAC, the Department of Commerce’s Bureau of Industry and Security, and the Department of State’s Bureau of International Security and Nonproliferation.
- Transnational criminal organizations (TCOs) include international drug trafficking organizations (DTOs) operating in the United States that engage in a wide range of illegal activity, including corruption, weapons trafficking, cybercrimes, intellectual property theft, fraud, wildlife trafficking, drug trafficking and human smuggling/human trafficking.
This area is at a high-priority threat level due to the wide range of illicit activity. Russian and Mexican TCOs operating in the United States continue to be priority threats, and Asian and African TCOs have become more significant each year and continue to employ a variety of money laundering methods to avoid detection.
- Drug trafficking and illicit drugs continue to generate significant proceeds for DTOs. The proceeds, which may be laundered in or through the United States, and the drugs themselves contribute to a significant public health emergency.
There has been a substantial increase in complex schemes to launder proceeds from the sale of narcotics by facilitating the exchange of cash proceeds from Mexican DTOs to Chinese citizens residing in the United States, including the use of front companies or couriers to deposit cash derived from the sale of narcotics into the banking system.
In 2019, FinCEN issued an advisory related to the trafficking of fentanyl and other synthetic opioids that contained an extensive discussion of typologies, case studies and red flags.
Need assistance implementing FinCEN priorities?
While the announcement of the priorities did not immediately change BSA requirements for covered institutions, the change is coming. The AML Act required that regulations be promulgated within 180 days of the establishment of the priorities. Institutions will be required to incorporate AML/CFT priorities into risk-based BSA programs upon the effective date of the final revised regulations.
However, we recommend covered institutions begin to consider how to incorporate the priorities by assessing the potential related risks associated with the geographies they operate in, the customers they serve and the products and services they offer.
If you have questions or need assistance, reach out to Wipfli.
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