Last week, the Office of the Comptroller of the Currency (“OCC”) released its semiannual risk report (“Report”) highlighting credit, operational, and compliance risks to the federal banking system. The Report focuses on issues that pose threats to those financial institutions regulated by the OCC and is intended to be used as a resource to by those financial institutions to address the key concerns identified by the OCC. Specifically, the OCC places cybersecurity and Anti-Money Laundering (“AML”) among the top concerns highlighted in the Report. The Report further observes that the total number of enforcement actions by the OCC against banks — instituted for any kind of alleged violations — have declined steadily after peaking in 2009. Continue Reading OCC Report: Cybersecurity and Money Laundering Threats are the Key Risks Facing Banks
We are really pleased to announce that Ballard Spahr has launched CyberAdviser, a new blog focused on the latest news and developments in privacy and cybersecurity law.
It will offer insights into the latest governance and compliance matters, investigations, civil and criminal litigation, regulatory and legislative developments, industry trends, emerging technologies, and other cyber issues that may be just a click away. CyberAdviser is produced by the members of our Privacy and Data Security Group—a nationwide team of more than 50 attorneys who provide a wide range of legal services to help clients identify, manage, and mitigate cyber risk.
CyberAdviser will serve as an excellent counterpart to the issues we discuss in Money Laundering Watch. To demonstrate the (increasingly) frequent overlap between AML and privacy and cybersecurity issues, our colleague Kim Phan is posting today in both blogs about a new report issued by the Office of the Comptroller of the Currency regarding the cybersecurity and money laundering threats currently facing banks.
Last week, the Financial Action Task Force (“FATF”) issued a report concluding that Mexico needs to “step up efforts in pursuing money launderers.” The report, which summarized the FATF’s findings from its on-site assessment in early 2017, identified three particularly weak areas in Mexico’s AML regime: preventative measures; investigation and prosecution; and confiscation. This post summarizes the report’s findings, and observes that Mexico is not the only nation needing to “step up” its efforts. Further, given the strong financial and geographic ties between Mexico and the U.S., the AML challenges of Mexico can be the challenges of the U.S. Continue Reading Mexico’s AML Regime Evaluated by the FATF: Systemic Improvement, but Suspicious Transaction Reporting and Law Enforcement Efforts Continue to Struggle
Attorney General Sessions Announces Rescission of Obama Administration Policies on Marijuana Enforcement; Financial Institutions Lose Grounds to Permit Financial Transactions with Marijuana Businesses
In a single-page memorandum issued today, Attorney General Sessions tersely rescinded a string of DOJ enforcement policies announced during the Obama Administration — chief among them the “Cole Memo,” described below — which collectively had indicated that although marijuana was still illegal under federal drug laws and the DOJ would continue its enforcement of those laws, the DOJ also would defer to state governments that had developed regulatory regimes legalizing marijuana under defined circumstances. Although Attorney General Sessions is well known for his personal distaste for marijuana-related activity, he previously had not been entirely clear as to exactly what position his DOJ would take in regards to the Cole Memo and related enforcement.
Although this policy change has many potential implications, its primary relevance to Anti-Money Laundering (“AML”), the Bank Secrecy Act (“BSA”), and money laundering issues is that the Cole Memo had provided the support for the federal government to issue guidance that, under very defined circumstances, financial institutions could provide services to state-licensed marijuana businesses. Continue Reading Marijuana Enforcement: DOJ Cole Memo Up in Smoke
The Office of Foreign Assets Control (“OFAC”) wrapped up 2017 by issuing a series of high-profile designations generally prohibiting U.S. persons from conducting financial or other transactions with the identified individuals and entities, and freezing any assets which these individuals and entities may have under U.S. jurisdiction. Specifically, OFAC, acting in conjunction with a new Executive Order issued by the President pursuant to the Global Magnitsky Human Rights Accountability Act (“Magnitsky Act”), sanctioned on December 21 a list of alleged international bad actors, including Dan Gertler, a billionaire and international businessman from Israel who has been involved in, among other notorious ventures, alleged corruption in the mining of diamonds and copper in the Democratic Republic of the Congo. The next day, OFAC then sanctioned individuals and entities allegedly associated with Thieves-in-Law, an alleged and unapologetically-named Eurasian criminal entity; according to the U.S. government, Thieves-in-Law originated in Stalinist prison camps and has grown over time into a “vast criminal organization” stretching across the globe and into the United States. Continue Reading OFAC Designates Diamond Mining Billionaire, “Thieves in Law,” and Many Other International Targets as Subject to U.S. Sanctions and Asset Freezes
As the value of bitcoin continues to soar (USD:BTC this past weekend exceeded $19,000.00:1), we thought that now would be a good time to emphasize the need to ensure regulatory compliance with the many federal and state AML rules and regulations, in addition to those segmented across various countries. A caveat: This post is far from exhaustive, and before undertaking any investment in cryptocurrency, it would be wise to consult with an attorney familiar with the rules applicable to the cryptocurrency sector. Due to the nascency of the sector, the practical application of previously existing laws and regulations is rapidly evolving.
To begin, the notion that bitcoin and other digital tokens represent a currency only for criminals has been dispelled. Indeed, there is no question that investment in cryptocurrencies is inherently lawful and increasingly commonplace. In 2017 alone, investment in initial coin offerings, or token sales, has exceeded $1.5 billion; in a similar vein, the value of certain cryptocurrencies now exceeds a number of Fortune 50 companies. Most recently, CBOE and CME, the world’s largest futures exchange, launched bitcoin futures contracts.
With this in mind, and as we have written on this blog before (see here, here, here, here, here, here, here, here, and here), it is clear that regulators are moving aggressively to bring the cryptocurrency sector into the fold of existing rules and regulations. To be sure, applying these rules to the burgeoning sector has been like fitting a square peg in a round hole; a bedrock of the initial cryptocurrency boom was the promise of anonymity for its users. Conversely, identity verification is a bedrock of AML compliance. Continue Reading Beyond Best Practices: Regulatory Compliance Now a Necessity in the Cryptocurrency Sector
After over a year of negotiations, the European Parliament and its executive arm, the European Council, recently agreed to an amendment to the Fourth Anti-Money Laundering Directive to include measures targeting exchange platforms for virtual currencies, such as Bitcoin, as well as prepaid cards. These new regulations will require an increase in transparency by the trusts and trading companies to reveal the holders of virtual currency to thwart potential money laundering, tax evasion, and anonymous funding of terrorism. Primary among these regulations is a requirement to provide beneficial ownership information to authorities and “any persons that can demonstrate a legitimate interest” to access data on the beneficial owners of trusts.
This focus on beneficial ownership in regards to virtual currency is entirely consistent with the general AML regulatory efforts in the United States and around the globe over the last few years, which have emphasized heavily the need to identify the beneficial owners of financial accounts, real estate and other assets in order to attain a more transparent financial system.
The regulation adopted by the European Parliament and European Council also comes as Bitcoin’s prices surged over 1,700 percent since the start of 2017. This outstanding growth has increased main stream interest in the virtual currency while also sounding alarm bells as some fear that Bitcoin is a bubble bound to burst. A key part of the amendment is that access to beneficial ownership information should be provided to authorities and “any persons that can demonstrate a legitimate interest.” Continue Reading EU Adopts Regulations Increasing Transparency in Virtual Currency Trading to Combat Money Laundering, Tax Evasion, and Terrorism Financing
FinCEN recently announced the launching of the “FinCEN Exchange” to enhance information sharing with financial institutions. We previously have blogged about the potential benefits of a public-private partnership between law enforcement and financial institutions for both parties as a way to enhance law enforcement’s efforts to disrupt and intercept money laundering and terrorist financing as well as a financial institution’s ability to identify and accurately report suspicious activity. Information sharing has become a key issue in global conversations about reform of Anti-Money Laundering (“AML”) regimes.
The FinCEN Exchange represents a direct response to financial industry requests for more guidance and information from government to help identify and report suspicious activity. Although it is a positive step towards improving the system for reporting suspicious activity, the FinCEN Exchange presumably will create expectations by the government that problems identified by the Exchange will be captured by suspicious activity reporting going forward. Hopefully, the converse also will occur, and expectations regarding the reporting of activity identified as low priority will be lowered, so that industry truly may focus its current resources and not be compelled to expend even more resources on AML compliance. Continue Reading Information Sharing Exchange Launched by FinCEN to Improve Suspicious Activity Reporting
As 2017 winds down, we are taking a look back at the first year of Money Laundering Watch.
We want to thank our many readers around the world who have made Money Laundering Watch such a success since we launched it less than a year ago. The feedback we receive from financial industry professionals, compliance officers, in-house and external lawyers, AML/BSA consultants, government personnel, journalists, and others interested in this field is invaluable, and we hope you will continue to share your perspectives with us. We pride ourselves on providing in-depth discussions of the important developments in this ever-evolving area and their potential implications.
2017 has been a busy year in the world of financial corruption. We are highlighting 12 of our most-read blog posts, which address many of the key issues we’ve examined this year.
- Individual Accountability in AML Cases
- FinCEN’s Beneficial Ownership Rule: A Practical Guide to Being Prepared for Implementation
- As Digital Currency Spreads, So Does its Global Regulation: India and Australia Enter the Fray
- OFAC Targets Alleged Mexican Drug Boss and “His Vast Network,” Including International Soccer Superstar
- Combatting Money Laundering and Terrorist Financing Through Enhanced AML Information Sharing
- Money Laundering Watchdog Criticizes Lax AML Enforcement and “Creative Compliance” in Wake of Panama Papers
- SEC: Broker-Dealer Maintained AML Compliance Plan in Name Only
- High-Profile Spanish Money Laundering Investigation of Chinese Bank Raises Questions About Future of Similar U.S. Enforcement
- Pennsylvania Supreme Court Strengthens Protections For Property Owners In Landmark Civil Forfeiture Decision
- Banking and the Marijuana Industry
- FinCEN Fines Texas Bank $2M for Alleged Failure to Vet and Monitor Mexican Correspondent Banking Relationship – But Touts Bank’s Cooperation
- Manafort Indictment Alleges High-End International Money Laundering and Tax Fraud Involving Offshore Accounts
We look forward to continuing to keep you informed in 2018. If you would like to subscribe to Money Laundering Watch, please click here.
We are very pleased to be presenting on the topic of SEC enforcement against broker-dealers and mutual funds relating to alleged underlying Anti-Money Laundering and Bank Secrecy Act violations, and associated private class action lawsuits, at the upcoming meeting of the Securities Regulation Committee of the New York State Bar Association on this Wednesday, December 13, 2017. This is a topic of increasing importance on which we have blogged repeatedly (see here, here, here and here); FinCEN also has proposed similar AML regulations for investment advisors. We also will discuss the hot topic of potential SEC enforcement involving digital currency and Initial Coin Offerings, or ICOs, and the general role of AML in the digital currency industry. The program will begin at 7:00 p.m. and is hosted at the New York City offices of Skadden, Arps, Slate, Meagher & Flom LLP. Thanks again to the Committee for this invitation; we look forward to it.
If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch.