hardyp@ballardspahr.com | 215.864.8838 | view full bio

Peter is a national thought leader on money laundering, tax fraud, and other financial crime. He is the author of Criminal Tax, Money Laundering, and Bank Secrecy Act Litigation, a comprehensive legal treatise published by Bloomberg BNA.  Peter co-chairs the Practising Law Institute's Anti-Money Laundering program, and serves on the Steering Committee for the Cambridge Forum on Sanctions & AML Compliance

He advises corporations and individuals from many industries against allegations of misconduct ranging from money laundering, tax fraud, mortgage fraud and lending law violations, securities fraud, and public corruption.  He also advises on compliance with the Bank Secrecy Act and Anti-Money Laundering requirements.  Peter handles complex litigation involving allegations of fraud or other misconduct.

Peter spent more than a decade as a federal prosecutor before entering private practice, serving as an Assistant U.S. Attorney in Philadelphia working on financial crime cases. He was a trial attorney for the Criminal Section of the Department of Justice’s Tax Division in Washington, D.C.

On March 7, the Financial Crimes Enforcement Network (“FinCEN”) issued an alert “advising all financial institutions to be vigilant against potential efforts to evade the expansive sanctions and other U.S.-imposed restrictions implemented against potential efforts to evade the expansive sanctions and other U.S.-imposed restrictions implemented in connection with the Russian Federation’s further invasion of Ukraine.”  The press release is here.  The alert itself is here.
Continue Reading  Russian Sanctions:  FinCEN Provides Red Flags for Potential Evasion Attempts

President Biden has signed an Executive Order entitled “Ensuring Responsible Innovation in Digital Assets.”  The press release regarding the Order is here.

According to the press release, the Order outlines “the first ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology. The Order lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.”  Not surprisingly, the section of the Order pertaining to illicit finance focuses on AML concerns, and refers to issues on which we have blogged repeatedly, including the use of digital assets to further ransomware schemes and the global patchwork quilt of crypto-related AML regulation.

The Order does not make any substantive conclusions.  Rather, it sets forth requirements for various government agencies to coordinate and submit reports and recommendations regarding many different issues.  We set forth below the bulk of the press release, which nicely summarizes the Order, and highlight in bold the six “key priorities.”
Continue Reading  President Biden Issues Executive Order on Digital Assets and “Whole-of-Government Approach” to Risks and Benefits

Federal law enforcement and regulators continue to focus on technology-driven financial crime — specifically, cyber-enabled fraud and the laundering of illicit funds through cryptocurrency.  Last week, the Department of Justice (“DOJ”) announced that Eun Young Choi will serve as the first Director of the National Cryptocurrency Enforcement Team (“NCET”).  As we have blogged, the DOJ created in 2021 the NCET in order to address issues on which we repeatedly have blogged:  crypto exchangers and their AML obligations; the process of tracing digital asset transactions; ransomware; so-called “professional” money launderers; and the use of crypto to launder serious crimes such as drug trafficking and human trafficking.  This attempt at a coordinated government approach to crypto enforcement followed the announcement earlier in 2021 by the Financial Crimes Enforcement Network (“FinCEN”) of appointing its first-ever Chief Digital Currency Advisor.

Meanwhile, FinCEN has stressed the need for, and utility of, specific information to be submitted by the victims of cyber-enabled financial crime schemes, or the financial institutions of those victims, to FinCEN’s Rapid Response Program, or RRP.  The RRP seeks to share financial intelligence and recover the proceeds of crime.
Continue Reading  DOJ, FBI and FinCEN Continue to Focus on Crypto and Cyber Financial Crime

But AML Concerns Linger As To “High End” Art and NFTs

On February 4, 2022, the U.S. Department of the Treasury published a study (the “Study”) on the facilitation of money laundering (“ML”) and terrorist financing (“TF”) through the trade in works of art.  The study was commissioned as a result of Section 6110(c) of the Anti-Money Laundering Act of 2020 (the “Act”), which required Treasury to examine art market participants and sectors of the art market that may present ML/TF risks to the U.S. financial system, and examine what steps regulators might take to mitigate these risks.

According to the press release accompanying the Study, “[s]everal qualities inherent to high-value art – the way it is bought and sold and certain market participants – may make the high-value art market attractive for money laundering by criminals. These include the high dollar value of transactions, transportability of goods, a longstanding culture of privacy and use of intermediaries (e.g., shell companies and art advisors), and the increasing use of high-value art as an investment class.”  As we will discuss, the Study proposes four scenarios—two regulatory and two nonregulatory—to mitigate money laundering risks in the art industry. Ultimately, however, the Study concludes that, “[w]eighed against other sectors that pose ML/TF risks, . . . the art market should not be an immediate focus for the imposition of comprehensive AML/CFT requirements.” (emphasis added).  Accordingly, any ML/TF regulation of the art trade will not happen soon.

Ironically, dealers in antiquities – an industry dwarfed by the size of the global art market – are not so lucky, because Congress already has subjected them to anti-money laundering (“AML”) duties.  As we blogged, the Act amended the Bank Secrecy Act’s (“BSA”) definition of “financial institution” to include those “engaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities, subject to regulations prescribed by the [Treasury] Secretary.”  The Financial Crimes Enforcement Network (“FinCEN”) still must issue implementing regulations for antiquities dealers.
Continue Reading  Treasury Report:  No Immediate Need for BSA Regulations for the Art Industry

We are pleased to offer the latest episode in Ballard Spahr’s Business Better podcast series, The Business of Cryptocurrency.  In this episode, we discuss the basics of money transmitter and Bank Secrecy Act registration and compliance program requirements. The episode also covers more complex regulatory issues confronting cryptocurrency exchanges, financial institutions, and other businesses

We are pleased to offer the latest episode in Ballard Spahr’s Consumer Financial Monitor Podcast series — a weekly podcast focusing on the consumer finance issues that matter most, from new product development and emerging technologies to regulatory compliance and enforcement and the ramifications of private litigation.

In this episode, we discuss the historic changes

Farewell to 2021, and welcome 2022 — which hopefully will be better year for all.  As we do every year, let’s look back — because 2021 was a very busy year in the world of money laundering and BSA/AML compliance, and 2022 is shaping up to be the same.

Indicative of the increased pace and

On December 14, the Financial Crimes Enforcement Network (“FinCEN”) issued a request for information (“RFI”), seeking comment on ways to “streamline, modernize, and update” the anti-money laundering (“AML”) and counter-terrorism financing (“CTF”) regime of the United States.  As we will discuss, the RFI is the latest development in a protracted inquiry into how to try to leverage technology in order to maximize the usefulness to the government of Bank Secrecy Act (“BSA”) reporting and record-keeping, and minimize the compliance costs imposed on industry.  However, as we also discuss, the RFI may add fuel to ongoing efforts to expand the coverage and reporting requirements of BSA regulations.
Continue Reading  FinCEN Seeks Comments on Modernizing the AML/CFT Regime

Proposed Reporting Rules Will Require Careful Parsing for Businesses and Revision of CDD Rule for Banks

As we initially blogged, the Financial Crimes Enforcement Network (“FinCEN”) issued on December 7 a Notice of Proposed Rulemaking (“NPRM”) regarding the beneficial ownership (“BO”) reporting requirements of the Corporate Transparency Act (“CTA”).  FinCEN’s press release is here; the NPRM is here; and a summary “fact sheet” regarding the NPRM is here.

The CTA requires defined entities – including most domestic corporations and foreign entities registered to do business in the U.S. – to report beneficial owner information (“BOI”) and company applicant information to a database created and run by FinCEN upon the entities’ creation or registration within the U.S.  This database will be accessible by U.S. and foreign law enforcement and regulators, and to U.S. financial institutions seeking to comply with their own Anti-Money Laundering (“AML”) and Customer Due Diligence (“CDD”) compliance obligations.

Congress passed the CTA because the ability to operate through legal entities without requiring the identification of BOI is a key AML risk for the U.S. financial system.  The CTA seeks to mitigate this risk by reducing an individual’s ability to use corporate structures to conceal illicit activity such as money laundering, financing of terrorism, and other offenses.  We often have blogged on the CTA and these impending regulations (see herehereherehere and here).

The NPRM describes who must file a BOI report, what information must be reported, and when a report is due.  Although this blog post is lengthy, it still only summarizes the NPRM, which is 55 pages long in the Federal Register.  The NPRM envisions broad and often complicated reporting requirements under the CTA, including an ongoing duty to update any changes in information.

Further, this NPRM addresses “only” BOI reporting.  FinCEN will engage in two additional rulemakings under the CTA to (1) establish rules for who may access BOI, for what purposes, and what safeguards will be required to protect such information; and (2) revise and conform FinCEN’s existing CDD rule for financial institutions.  As we will discuss, the NPRM undermines hopes that the CTA regulations would simplify the compliance obligations of financial institutions already covered by the CDD rule, which requires covered financial institutions to obtain BOI from certain entity customers.  To the contrary, the NPRM indicates that FinCEN will complicate and expand the definitions of the two groups of individuals qualifying as BOs – those exercising “substantial control” and those with a 25% “ownership interest” – and amend the existing CDD rule accordingly, so that the CTA regulations and the CDD rule supposedly align.

The potential application of these regulations is sweeping.  FinCEN estimates at least 25 million existing U.S. companies will have to make a report under the CTA when the proposed regulations become effective.  And approximately three million new entities created each year in the U.S. potentially will be subject to the regulations going forward.  The NPRM does not address the additional amount of foreign entities registered to do business in the U.S. covered by the CTA.
Continue Reading  Proposed Beneficial Ownership Reporting Regulations Under the CTA:  Broad and Complex

On December 6, FinCEN announced that it was issuing an Advanced Notice of Proposed Rulemaking (“AMPRM”) to solicit public comment on potential requirements under the Bank Secrecy Act (“BSA”) for certain persons involved in real estate transactions to collect, report, and retain information.  If finalized, such regulations could affect a whole new set of professionals and one of the largest industries in the U.S.—an industry which, heretofore, has not been subject to the requirements of the BSA, with limited exceptions.

The ANPRM envisions imposing nationwide recordkeeping and reporting requirements on specified participants in transactions involving non-financed real estate purchases, with no minimum dollar threshold.  Fundamentally, FinCEN highlights two alternate, proposed rules.  One proposed option, promulgated under 31 U.S.C § 5318(a)(2), would involve implementing specific and relatively limited reporting requirements, similar to those currently required of title insurance companies in the non-financed real estate market.  This rule would require covered persons to collect and report certain prescribed information, such as, presumably, beneficial ownership.  Alternatively, FinCEN is considering imposing more fulsome Anti-Money Laundering (“AML”) monitoring and reporting requirements, including filing Suspicious Activity Reports (“SARs”) and establishing AML/CFT programs under 31 U.S.C. § 5318(g)(1) and 31 U.S.C. §§ 5318(h)(1)-(2).   This latter option would require covered persons to adopt adequate AML/CFT policies, designate an AML/CFT compliance officer, establish AML/CFT training programs, implement independent compliance testing, and perform customer due diligence.

Notably, FinCEN suggests that any new rule may cover attorneys and law firms, along with other client-facing participants.  FinCEN also is considering regulations applicable to both residential and commercial real estate transactions.

As we discuss, real estate and money laundering has been a long-simmering issue.  We repeatedly have blogged on AML and real estate, and previously published a detailed chapter, The Intersection of Money Laundering and Real Estate, in Anti-Money Laundering Laws and Regulations 2020, a publication issued by International Comparative Legal Guides.  FinCEN’s ANPRM appears to represent the culmination of an inevitable march towards the issuance of regulations under the BSA regarding real estate transactions, following years of increasing focus by the U.S. government and others on perceived AML risks in the real estate industry.
Continue Reading  Real Estate and Money Laundering: FinCEN Issues Advanced Notice of Regulations for the Real Estate Industry