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
Agenda Highlights Intersection of National Security, Corruption and Anti-Money LaunderingOn June 3, 2021, President Biden unveiled a National Security Study Memorandum entitled Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest (the “Memo”). It reveals—as the title might suggest—that the Biden administration views “countering corruption as a core United States national security interest.” Corruption “corrodes public trust” in foreign nations, and—because of its cross-border nature—threatens “United States national security . . . and democracy itself.” This threat to democracy is created by, for example, “[a]nonymous shell companies, opaque financial systems, and professional service providers [that] enable the movement and laundering of illicit wealth, including in the United States.” Under the rubric of curbing illicit finance and promoting transparency, the Memo amplifies the importance of the Corporate Transparency Act (the “CTA”).
To combat these risks, the Biden administration will use a whole-of-government approach. The Memo calls for an interagency review to tap the expertise of a wide array of agencies and executive departments, including the Departments of the Treasury, Justice, Homeland Security, State, Commerce, and Energy. Within 200 days, an interagency review must be completed and a report and recommendations (the “Report”) must be submitted to the President. The Report will serve as the basis for the Biden administration’s strategy in its fight against corruption, both at home and abroad.
The Report has significant implications for many stakeholders: domestic and foreign financial institutions, U.S. corporations transacting business abroad, and foreign businesses and individuals operating or seeking to operate in the U.S. – as well as their professional advisors.
The Financial Accountability and Corporate Transparency Coalition (the “FACT Coalition”) has already heaped praise on the Memo, stating it represents “real progress in combating this global scourge” of corruption. And the Memo represents just one part of a broader federal focus on corruption. The Memo comes about a month and a half after President Biden’s Executive Order targeting Russia’s use of “transnational corruption to influence foreign governments.” It also comes just a day after the announcement of a bipartisan Congressional caucus, the Congressional Caucus against Foreign Corruption and Kleptocracy (the “Caucus”). The Caucus will focus exclusively on foreign corruption, what Sen. Ben Cardin calls a “national security priority of the highest order.” The Caucus will provide a means of educating members of Congress and coordinating efforts across committees. Additionally, the Memo’s release preceded by just a few days Vice President Harris’ visit to Latin America. According to a senior administration official, a major focus of Vice President Harris’ trip will be conversations on anti-corruption measures.
Continue Reading President Biden Unveils Broad Vision to Crack Down on Foreign and Domestic Corruption
Unlike broker-dealers, investment advisers are not currently required to maintain anti-money laundering (“AML”)/counter-terrorist financing (“CTF”) compliance programs under the Bank Secrecy Act (“BSA”), or file Suspicious Activity Reports (“SARs”). In 2015, during President Obama’s second term, the Financial Crimes Enforcement Network (“FinCEN”) proposed exactly such a rule for certain investment advisers. Although FinCEN then never moved forward, the stars may be aligning for the implementation of a similar rule in the new Biden Administration.
Industry watchdog groups will push for this. For example, after Biden’s victory in the 2020 election, the independent Financial Accountability & Corporate Transparency Coalition wrote a memorandum, asking him to “[f]inalize the proposed Obama-era rule requiring investment advisers to establish AML programs.” Action on this front also would be generally consistent with the 2020 Examination Priorities issued by the SEC’s Office of Compliance Inspections and Examinations (OCIE), which stated that the OCIE will prioritize examining broker-dealers “for compliance with their AML obligations in order to assess, among other things, whether firms have established appropriate customer identification programs and whether they are satisfying their SAR filing obligations, conducting due diligence on customers, complying with beneficial ownership requirements, and conducting robust and timely independent tests of their AML programs.” Moreover, the FBI’s concern over money laundering through private equity and hedge funds may increase the likelihood of the administration reviving some version of the 2015 proposed rule. A leaked FBI Intelligence Bulletin from May 2020 stated that “threat actors[, or money launderers,] likely use the private placement of funds, including investments offered by hedge funds and private equity firms, to launder money, circumventing traditional” AML protections in place at other financial institutions already subject to such regulations. According to its Intelligence Bulletin, the FBI made this assessment in “high confidence.”
Continue Reading Investment Advisers May Be Subject to AML Regulations Under Revival of Proposed Rule
A Textbook Case of Alleged Money Laundering?On November 18, 2019, the U.S. Attorney for the Southern District of New York announced the arrest and unsealed the indictment of Bruce Bagley – a 73-year-old college professor whose scholarship focuses on U.S.-Latin American relations, with an emphasis on drug trafficking and security issues. He has been
In recognition of the significance South America has played in recent FCPA enforcement, yesterday the FBI announced that it will establish a team of agents in Miami focused on FCPA cases in Miami and South America. Leslie Backschies, the Chief of the FBI’s international corruption unit, told reporters on March 4, 2019, that the new