On September 15th, FinCEN issued its latest “Advisory on FATF-Identified Jurisdictions with AML/CTF Deficiencies.” The FATF, or the Financial Action Task Force, is a 37-member intergovernmental body, including the United States, that establishes international standards to combat money laundering and the financing of terrorism. As part of its listing and monitoring process to ensure compliance with its international Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) standards, the FATF identifies certain jurisdictions as having “strategic deficiencies” in their AML/CFT regimes. In its latest Advisory, FinCEN notes the changes in the FATF-named jurisdictions and directs financial institutions to consider these changes when reviewing their obligations and risk-based policies, procedures and practices relating to the named jurisdictions. We will discuss these changes and some practical takeaways for U.S. financial institutions seeking to ensure compliance with these changes in their AML programs. Continue Reading FinCEN Issues Latest Advisory on FATF-Identified Jurisdictions with AML/CFT Deficiencies
On June 29, dual trial verdicts in the Southern District of New York paved the way for the government to seize 650 Fifth Avenue, a 36-story building in Manhattan valued at up to $1 billion (“the Property”). The defendants, representing New York entities that trace their roots to Iran, were convicted of violating U.S. sanctions and money laundering. With this decision, the government can lay claim to the largest terrorism-related civil forfeiture in U.S. history and, as promised, provide the sale’s proceeds to terror victims who had previously won $5 billion in judgments against Iran for terror-related activity.
Senators Chuck Grassley (R-Iowa) and Diane Feinstein (D-California) introduced on May 25, 2017 a bill, S. 1241, entitled the “Combatting Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017.” Although it is of course impossible to know whether this bill ultimately will be enacted into law, the bill addresses a lengthy catalogue of important issues relevant to money laundering, AML programs, and international tax evasion.
- The bill is here.
- A general summary of the bill is here.
- A more detailed and useful summary of each section of the proposed bill is here.
- The press release for the bill is here.
Perhaps not surprisingly, the press release repeatedly states that the bill is designed to fight terrorism. No doubt – but if enacted, the bill’s terms also will apply to any sort of conduct implicated by its amendments to sections of the criminal money laundering statutes, 18 U.S.C. §§ 1957 and 1957, and the Bank Secrecy Act. Further, the press release does not explicitly mention the Panama Papers scandal. However, given language in the bill seeking to address international tax evasion; the subpoenaing of records of foreign banks using U.S. correspondent bank accounts; the concealment of account ownership; and the concealment of the source of assets in transactions; the Panama Papers scandal looms in the background and presumably motivated much of S. 1241, just as it may have influenced the timing of the final release of the beneficial ownership regulations by FinCEN. Further, S. 1241 may be seeking to respond to mounting international criticism that the U.S. has become a haven for tax cheats and money launderers.
The proposed bill reads like a wish list of statutory amendments provided by the Department of Justice. Indeed, the press release also quotes Senator Feinstein as stating that “[o]ur bill adopts many of the recommendations made by the Justice Department to ensure that transnational criminal organizations, including terrorist groups, face consequences for laundering illicit funds, evading laws and promoting criminal activity[.]” The press release further states:
While calculating the exact scale of worldwide money laundering is impossible, estimates suggest the annual sum to be in the trillions of dollars. Perpetrators use a variety of methods to conceal and move funds across borders and through the global financial system in an effort to evade law enforcement. These techniques include longstanding unofficial money transferring systems, such as hawalas, and more modern tools, like prepaid access cards and digital currencies.
The Senators’ legislation modernizes criminal money laundering laws, updates counterfeiting statutes to prohibit state of the art counterfeiting methods, enhances tools to crack down on smugglers and tax cheats, and promotes transparency in the U.S. financial system.
We anticipate that follow-up blog posts will analyze certain specific amendments in more detail, and their potential implications. Given the breadth of issues covered by the bill, this post merely lists below the topics covered by the bill, by drawing from its table of contents. The section-by-section summary noted above provides more information on each topic.
- Transportation or transhipment of blank checks in bearer form.
- Bulk cash smuggling.
- Section 1957 violations involving commingled funds and aggregated transactions.
- Charging money laundering as a course of conduct.
- Illegal money services businesses.
- Concealment money laundering.
- Freezing bank accounts of persons arrested for offenses involving the movement of money across international borders.
- Prohibiting money laundering through hawalas, other informal value transfer systems, and closely related transactions.
- Technical amendment to restore wiretap authority for certain money laundering and counterfeiting offenses.
- Making the international money laundering statute apply to tax evasion.
- Conduct in aid of counterfeiting.
- Prepaid access devices, digital currencies, or other similar instruments.
- Administrative subpoenas for money laundering cases.
- Obtaining foreign bank records from banks with United States correspondent accounts.
- Clarification of Secret Service authority to investigate money laundering.
- Prohibition on concealment of ownership of account.
- Prohibition on concealment of the source of assets in monetary transactions.
Stay tuned . . . .
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A Guest Blog by Greg Baer, President of The Clearing House
Today we are very pleased to welcome guest blogger Greg Baer, who will address a series of significant issues posed by a detailed paper published by The Clearing House, a banking association and payments company that is owned by the largest commercial banks and dates back to 1853. The paper, titled A New Paradigm: Redesigning the U.S. AML/CFT Framework to Protect National Security and Aid Law Enforcement (The New Paradigm), analyzes the effectiveness of the current AML and Combatting the Financing of Terrorism (CFT) regime, identifies problems with that regime, and proposes a series of reforms to remedy them.
Mr. Baer is the President of The Clearinghouse Association L.L.C. and the Executive Vice President and General Counsel of The Clearing House Payments Company L.L.C. The Clearing House Association represents the interests of The Clearing House’s commercial bank ownership on a diverse range of regulatory and legislative matters. Its affiliate, The Clearing House Payments Company, is the only private-sector ACH and wire operator in the United States, clearing and settling nearly $2 trillion in U.S. dollar payments each day, representing half of all commercial ACH and wire volume. Prior to joining The Clearing House, Mr. Baer was Managing Director and Head of Regulatory Policy at JPMorgan Chase. He previously served as Deputy General Counsel for Corporate Law at Bank of America, and as a partner at Wilmer, Cutler, Pickering, Hale & Dorr. He also served as Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury, after serving as Deputy Assistant Secretary. Finally, Mr. Baer was managing senior counsel at the Board of Governors of the Federal Reserve System.
The New Paradigm is the product of two closed-door symposia that convened approximately 60 leading experts in the field of AML/CFT. The group included senior former and current officials from law enforcement, national security, bank regulation and domestic policy; leaders of prominent think tanks in the areas of economic policy, development, and national security; consultants and lawyers practicing in the field; FinTech CEOs; and the heads of AML/CFT at multiple major financial institutions. This blog post takes the form of a Q & A session, in which Mr. Baer responds to questions posed by Money Laundering Watch and explains the main positions set forth in The New Paradigm, and also replies to some potential counter-arguments. We hope you enjoy this discussion of these important issues. Continue Reading The New Paradigm: Proposed Reforms of the AML/CFT Regime by The Clearing House