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

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

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

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

Notice is First of Three Sets of Regulations for the CTA

Yesterday, the Financial Crimes Enforcement Network (“FinCEN”) issued a Notice of Proposed Rulemaking (“NPRM”) regarding the beneficial ownership reporting requirements of the Corporate Transparency Act (“CTA”), which requires defined entities – including foreign entities with a presence in the U.S. – to report their

I am very pleased to be part of two upcoming panels focused on key current risks relating to money laundering and anti-money laundering (“AML”), joined by wonderful and distinguished speakers.  I hope that you can join – the discussions should be lively, informative and useful to legal and compliance professionals.

ACAMS: Money Laundering and Real

A Guest Blog by Angelena Bradfield

Today we are very pleased to welcome guest blogger Angelena Bradfield, who is the Senior Vice President of AML/BSA, Sanctions & Privacy for the Bank Policy Institute. BPI is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks. Its members include universal banks, regional banks and the major foreign banks doing business in the United States.  BPI has been engaged in efforts to modernize the U.S. anti-money laundering/ countering the financing of terrorism (AML/CFT) regime for almost half a decade and worked closely with Senate and House leadership throughout the introduction and final passage of the Anti-Money Laundering Act of 2020 (AML Act). Angelena previously was a Vice President at The Clearing House Association, where she supported its regulatory affairs department in similar policy areas. Before that, she supported comprehensive immigration reform efforts at ImmigrationWorks USA and worked on various domestic policy issues at the White House where she served as a staff assistant in both the Domestic Policy Council and Presidential Correspondence offices.

We reached out to Angelena regarding BPI’s recent letter to the Financial Crimes Enforcement Network (FinCEN) commenting on its implementation of the Corporate Transparency Act (CTA).  Congress passed the CTA on January 1, 2021, as part of the AML Act.  The CTA requires certain legal entities to report their beneficial owners to a directory accessible by U.S. and foreign law enforcement and regulators.  This directory also will be accessible to U.S. financial institutions seeking to comply with their own AML obligations, particularly the beneficial ownership regulation, otherwise known as the Customer Due Diligence Rule (CDD Rule), already applicable to banks and other financial institutions. The CTA’s beneficial ownership directory is one of the most important and long-awaited changes to the BSA/AML regulatory regime, but it presents many challenges, both legal and logistical.  On April 5, 2021, FinCEN issued an advance notice of proposed rulemaking to solicit public comment on the CTA’s implementation.  In response, FinCEN received over 200 letters from industry stakeholders – including the letter from BPI.

This blog post again takes the form of a Q&A session, in which Angelena responds to questions posed by Money Laundering Watch about the CTA and how it should be implemented.  We hope you enjoy this discussion on this important topic. – Peter Hardy and Shauna Pierson
Continue Reading Implementing the Corporate Transparency Act:  A Guest Blog

FATF Issues White Paper Addressing Challenges Facing Beneficial Ownership Collection

First Post in a Series on the FATF Plenary Outcomes

 The Financial Action Task Force (“FATF”) held its fourth Plenary, virtually, on June 21-25.  Delegates representing 205 members of the Global Network and observer organizations, including the International Monetary Fund, the United Nations, and the World Bank attended.  They discussed numerous topics, including the financial flows linked to environmental crime; financing of ethnically or racially motivated terrorism; risks relating to the financing of proliferation of weapons of mass destruction; virtual assets and virtual asset service providers, or VASPs; technological innovations; and asset recovery outcomes.  Many of these topics will be the subject of forthcoming reports from FATF.  Significantly, the group also discussed transparency surrounding information on the beneficial ownership of entities, which of course is the focus of the Corporate Transparency Act (“CTA”) recently passed in the United States.

Here, we will focus on (i) the white paper on beneficial ownership issued by FATF as a result of the Plenary, and (ii) developments in FATF’s country-specific measures in place to combat money laundering.  Future blog posts will discuss other outcomes and related reports produced by this wide-ranging Plenary, such as the report regarding money laundering and environmental crime.

As we will discuss, the beneficial ownership white paper seeks to obtain guidance on numerous legal and logistical challenges to the collection of such information, such as verification and access.  Many of these same challenges exist for U.S. regulators and the regulated community in regards to the CTA.  As to the country-specific measures, FATF has subjected Haiti, Malta, the Philippines, and South Sudan to increased monitoring, whereas Ghana’s status has improved.
Continue Reading FATF Concludes Fourth Plenary on Money Laundering and Terrorist Financing Risks

Today we are very pleased to welcome guest blogger Tess Davis, who is the Executive Director of the Antiquities Coalition. Tess, a lawyer and archaeologist by training, oversees the organization’s work to fight cultural racketeering worldwide, as well as its award-winning think tank in Washington. She has been a legal consultant for the U.S. and foreign governments and works with both the art world and law enforcement to keep looted antiquities off the market. She writes and speaks widely on these issues — having been published in the New York Times, the Wall Street Journal, CNN, Foreign Policy, and top scholarly journals — and featured in documentaries in America and Europe. She teaches cultural heritage law at Johns Hopkins University, and is a Term Member of the Council on Foreign Relations.  In 2015, the Royal Government of Cambodia knighted Tess for her work to recover the country’s plundered treasures, awarding her the rank of Commander in the Royal Order of the Sahametrei.

We reached out to Tess because Congress passed the Anti-Money Laundering Act of 2020 (“AMLA”) on January 1, 2021.  This sprawling legislation in part applies the Bank Secrecy Act (“BSA”) to antiquities dealers by defining them as “financial institutions” – and suggests that the BSA later may apply to the art trade as well by requiring a study on money laundering and the art trade.  We have blogged repeatedly on the fascinating intersection between the art and antiquities industry and BSA/AML compliance and money laundering concerns.  This also is a topic that has garnered significant media interest, including in a recent article in the New York Times.  For ease of reference, the AMLA’s requirements for factors to be considered for forthcoming regulations on the antiquities trade, and for the factors relevant to the study on the art trade, are described here.

The Antiquities Coalition convened the Financial Crimes Task Force; their materials, including a detailed joint report, Reframing U.S. Policy on the Art Market: Recommendations for Combating Financial Crimes, are available here.  Antiquities, art and money laundering also was the subject of a panel at PLI’s May 2021 Anti-Money Laundering Conference, at which Tess was a panelist.

This blog post again takes the form of a Q&A session, in which Tess responds to questions posed by Money Laundering Watch about potential AML regulations regarding the antiquities and art markets. We hope you enjoy this discussion on this important topic. – Peter Hardy and Alex Levy
Continue Reading Congress Regulates the Antiquities Market – and Perhaps the Art Market – for AML Compliance:  A Guest Blog.

Agenda Highlights Intersection of National Security, Corruption and Anti-Money Laundering

On 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