Earlier this summer, the Financial Crimes Enforcement Network (“FinCEN”) issued national priorities for the anti-money laundering and countering the financing of terrorism (“AML/CFT”) policy (the “Priorities”).[i]
The Priorities were issued pursuant to Section 6101(b)(2)(C) of the Anti-Money Laundering Act of 2020 (the “AML Act”)[ii] after consultations with relevant Department of the Treasury offices, the Attorney General, federal and state regulators, and relevant law enforcement and national security agencies. FinCEN intended to establish national priorities to govern AML/CFT policy, applicable to both bank and non-bank financial institutions (collectively, “Covered Institutions”).
The Priorities, identified by FinCEN in no particular order, are as follows:
- Corruption. The Priorities emphasize that countering corruption is “a core national security interest of the United States,” with a particular focus on political corruption and misappropriation of public assets and bribery.
- Cybercrime, including relevant cybersecurity and virtual currency considerations. The Priorities define cybercrime broadly as any illegal activity that involves a computer, another digital device, or a computer network. The Priorities highlight the need to combat ransom-related activity, which has targeted various sectors, including finance, government, education, energy, and health care. The Priorities also note that convertible virtual currencies have become the preferred method to pay for illicit goods and drugs, and for buying ransomware tools and services.
- Foreign and domestic terrorist financing. The Priorities discuss both foreign and domestic terrorist financing, while emphasizing that domestic terrorism is an evolving risk area and an “ongoing threat to Americans.” The Priorities state that the most lethal domestic violent extremist threats come from “racially or ethnically motivated violent extremists.”
- Fraud. The Priorities state that fraud schemes, such as bank, consumer, health care, securities and investment, and tax fraud, are believed to generate the largest share of illicit proceeds in the U.S., while highlighting that new internet-enabled schemes, such as romance scams, are on the rise. COVID-19 related fraud schemes are also being aggressively pursued, to include economic impact payment, unemployment insurance, counterfeit COVID-19 vaccine, pump-and-dump and other market manipulation schemes.
- Transnational criminal organization activity. FinCEN identified transnational criminal organizations, including drug trafficking organizations (“DTOs”), as priority threats due to the crime-terror nexus and their engagement in a wide range of illicit activities, including cybercrime, drug trafficking, fraud, wildlife trafficking, human smuggling, human trafficking, intellectual property theft, weapons trafficking and corruption.
- Drug trafficking organization activity. The Priorities explain that DTOs have contributed to a significant public health emergency. FinCEN has seen an increase in complex schemes to launder proceeds of drug sales by facilitating the exchange of cash from Mexican DTOs to Chinese citizens living in the U.S.
- Human trafficking and human smuggling. FinCEN acknowledged two previously issued advisories that identified financial and behavioral red flags of human trafficking and human smuggling. The Priorities highlight that the illicit proceeds of human trafficking can include income associated with housing, transportation, and exploitation of victims.
- Proliferation financing. The Priorities define proliferation financing as the act of providing funds or financial services used for the manufacture, acquisition, possession, development, export, trans-shipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons, in violation of national laws or international obligations. FinCEN states that global correspondent banking is a main vulnerability and driver of proliferation financing risk within the U.S. due to its central role in processing U.S. dollar transactions.
Impact of the National AML/CFT Priorities
In addition to the Priorities, FinCEN published two related statements to Covered Institutions providing further guidance on how to approach the Priorities.[iii] The statements clarify that the Priorities do “not create an immediate change to Bank Secrecy Act (“BSA”) requirements or supervisory expectations” for Covered Institutions. Rather, FinCEN and the regulators will revise the BSA regulations within 180 days to address how the Priorities will be incorporated into the BSA requirements.
Until the effective date of the new regulations, FinCEN recommends that Covered Institutions begin to evaluate how to incorporate the Priorities into their compliance programs, such as by assessing potential risks associated with customers they serve, the products and services they offer, and the geographic areas where they operate.
As required by the AML Act, FinCEN will update the Priorities to account for new or evolving AML/CFT threats at least once every four years.[iv]
[i] Department of the Treasury Financial Crimes Enforcement Network, Anti-Money Laundering and Countering the Financing of Terrorism National Priorities (June 30, 2021), https://www.fincen.gov/sites/default/files/shared/AML_CFT%20Priorities%20(June%2030%2C%202021).pdf.
[ii] The AML Act was enacted as Division F, §§ 6001-6511, of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, H.R. 6395, 116th Cong. (2021) (enacted) (enrolled bill available at https://www.govinfo.gov/content/pkg/BILLS-116hr6395enr/pdf/BILLS-116hr6395enr.pdf).
[iii] See Department of the Treasury Financial Crimes Enforcement Network, Interagency Statement on the Issuance of the Anti-Money Laundering/Countering the Financing of Terrorism National Priorities (June 30, 2021), https://www.fincen.gov/sites/default/files/shared/Statement%20for%20Banks%20(June%2030%2C%202021).pdf; See also, Department of the Treasury Financial Crimes Enforcement Network, Statement on the Issuance of the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) National Priorities, (June 30, 2021), https://www.fincen.gov/sites/default/files/shared/Statement%20for%20Non-Bank%20Financial%20Institutions%20(June%2030%2C%202021).pdf.
[iv] 31 U.S.C. § 5318(h)(4)(B) (as amended by AML Act § 6101(b)(2)(C)).