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
On January 24, 2022, the Financial Crimes Enforcement Network (“FinCEN”) published a Notice of Proposed Rulemaking (“NPRM”). FinCEN is proposing a rule to establish a pilot program that permits certain financial institutions to share Suspicious Activity Reports (“SARs”) in alignment with Section 6212(a) of the Anti-Money Laundering Act of 2020 (“AML Act”).
This proposed rule would add a new section at 31 C.F.R. section 1010.240, which would enact a pilot program permitting financial institutions with SARs reporting obligations to share SARs and SARs information with its foreign branches, subsidiaries, and affiliates for the purpose of combating illicit finance risks. According to FinCEN, this proposed rule ensures that federal and state law enforcement mechanisms would limit the sharing of SARs and information related to SARs. Moreover, the proposed role considers the intelligence community’s potential concerns and would be governed by requirements and standards surrounding the confidentiality of personally identifying information and data security.
The pilot program does not apply to all foreign branches of a financial institution. Rather, the proposed rule would largely exclude the sharing of SARs and SARs information with foreign affiliates in The People’s Republic of China, the Russian Federation, and any jurisdiction that is a state sponsor of terrorism, that is subject to United States sanctions, or that the Secretary of the Treasury (the “Secretary”) has determined cannot reasonably protect the security of SARs and SARs information. A “state sponsor of terrorism” is a jurisdiction so determined by the United States Department of Justice. The Secretary may, however, make exceptions to this prohibition on a case-by-case basis by notifying the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services that such an exception is in the United States’ national security interests.
Continue Reading Sharing is Caring: FinCEN Proposes Extending Sharing Suspicious Activity Reports to Foreign Affiliates
On January 13, 2022, Himamauli “Him” Das, the Acting Director of FinCEN, virtually addressed the Financial Crimes Enforcement Conference hosted by the American Bankers Association and the American Bar Association. In his speech, Mr. Das highlighted the transformation and modernization of the anti-money laundering/counter-terrorist financing (“AML/CFT”) regulatory framework from a tool updated in the wake of September 11, 2001 to combat money flows to terrorist organizations, to an instrument designed to address the more complex current and future challenges presented by digital assets and strategic corruption.
Acting on the authority accorded FinCEN by the Anti-Money Laundering Act of 2020 (the “AML Act”), FinCEN has been in the process of reorganizing and upscaling several of its divisions in order to meet increased obligations. New divisions include the Global Investigations Division, the Strategic Operations Division and the Enforcement and Compliance Division, which together work to combine resources against bad actors, share information, and act to resolve investigations across the financial sector. Mr. Das focused on three additional areas that FinCEN would concentrate on moving forward: new threats, new innovations and new partnerships.
Continue Reading Transformation of the AML/CFT Regulatory Regime Requires Innovation and Collaboration, According to FinCEN Acting Director
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 BanksAs 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 here, here, here, here 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
Strategy Reflects Coordinated Focus on Transparency and “Gatekeeper” Responsibilities Last week, the Biden Administration unveiled a sweeping “whole-of-government approach” to combating corruption. Identifying corruption as a “cancer within the body of societies—a disease that eats at the public trust and the ability of governments to deliver for their citizens”—the United States Strategy on Countering Corruption (the “Plan”) articulates a global vision for rooting out this national security threat. The first-of-its-kind approach focuses on responding to corruption’s transnational dimensions, with a specific emphasis on reducing “the ability of corrupt actors to use the U.S. and international financial systems to hide assets and launder proceeds of corrupt acts.” Although the Plan is grounded in “five-mutually reinforcing pillars,” pillars two and three merit a closer look from this blog’s readers. They serve as an important recap of the various steps the Administration has taken to combat illicit finance and its strategy for increased enforcement using both the new and existing tools at its disposal. Further, the Plan implicates many pressing Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) issues on which we repeatedly blog, as we will discuss.
Continue Reading White House Releases Sweeping U.S. Strategy on Countering Corruption
We previously blogged about the Financial Crimes Enforcement Network’s (“FinCEN’s”) issuance on June 30 of the first government-wide list of priorities for anti-money laundering and countering the financing of terrorism (“AML/CFT”) (the “Priorities”), as required by the Anti-Money Laundering Act of 2020 (“AML Act”). The eight-item list was a “greatest hits” rundown of
Lawmakers Targeted “Gatekeeper” Professions Following the Pandora Papers LeakMotivated by revelations contained in the recently-released Pandora Papers, on October 6, 2021, four U.S. Representatives – Tom Malinowski (D-NJ), Maria Elvira Salazar (R-FL), Steve Cohen (D-TN), and Joe Wilson (R-SC) – introduced House Resolution 5525, named the Establishing New Authorities for Business Laundering and Enabling Risks to Security (“Enablers”) Act. Generally, the Pandora Papers are an 11.9 million document stockpile published by the International Consortium of Investigative Journalists (“ICIJ”) that revealed the offshore accounts of dozens of world leaders and more than one hundred billionaires, celebrities, and business leaders. Analysis of the leaks unveiled how the wealthy allegedly used offshore accounts, hidden trusts, and shell companies to hide trillions of dollars, evade tax collectors, and launder money.
The Enablers Act targets the so-called “middlemen” in the United States who allegedly assist with those bad acts. In a press release, Representative Wilson stated bluntly who he believed to be the “U.S. enablers of kleptocracy”: “unscrupulous lawyers, accountants, and others” that allegedly fail to conduct adequate due diligence in international transactions.
The Act, if passed, would amend the Bank Secrecy Act (“BSA”) to require the Treasury Department to promulgate due diligence requirements for the “middlemen,” which include investment advisors, art dealers, attorneys involved in financial activity, accountants, third-party payment providers, and others.
The Act is nascent proposed legislation that is still subject to refinement as it winds its way through the House Financial Services Committee. Suffice to say, however, there are some initial questions about the bill’s scope and function that give us pause. The details are catalogued below.
Continue Reading The ENABLERS Act Seeks to Impose BSA/AML Requirements on an Array of “Middlemen” Professionals
On September 23, the Financial Crimes Enforcement Network (“FinCEN”) issued an advance notice of proposed rulemaking (“ANPRM”) to solicit comment on questions related to the implementation of anti-money laundering (“AML”) rules in the antiquities market.
As we have previously blogged, the Anti-Money
In the midst of the invasion of Iraq and the subsequent civil instability, thousands of cultural artifacts were stolen from the National Museum of Iraq. Among them: the Dream Tablet of Gilgamesh (the “Dream Tablet”), a clay tablet at least 3,000 years old, inscribed with part of the oldest works of narrative poetry in the world, the Epic of Gilgamesh.
The Dream Tablet illegally wound its way to the United States in 2003, and Hobby Lobby purchased it in 2014 for $1.67 million. Now, it is returning to Iraq. Per a July 27, 2021 Department of Justice (“DOJ”) press release, the Eastern District of New York ordered Hobby Lobby to forfeit the Dream Tablet because its importation violated the United States’ ban on the importation of Iraqi archaeological and ethnological materials.
Although this is not a pure money laundering case, this forfeiture action implicates the intersection of the antiquities and art trades and anti-money laundering (“AML”) concerns, a subject we cover frequently, including in a recent guest post by on potential AML regulations for the antiquities and art market. Of course, the Anti-Money Laundering Act of 2020 (“AML Act”) in part imposes Bank Secrecy Act (“BSA”) obligations on antiquities dealers by defining a “person 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” as a “financial institution” covered by the BSA. The Dream Tablet case illustrates the issues that antiquities dealers will have to face under a mandatory BSA/AML regime, including the filing of Suspicious Activity Reports (“SARs”).
Continue Reading DOJ Obtains Forfeiture of the Dream Tablet of Gilgamesh