Six years ago, in early 2018, we blogged about the U.S. Department of the Treasury’s Financial Crimes Enforcement Network’s (“FinCEN’s”) designation of ABLV Bank, AS (“ABLV”), then the second-largest bank in Latvia, as a foreign financial institution “of primary money laundering concern” pursuant
Today we are very pleased to welcome, once again, guest blogger Dr. Kateryna Boguslavska of the Basel Institute on Governance (“Basel Institute”), who will discuss the Basel Institute’s release of the 12th annual Public Edition of the Basel AML Index (the “Index”). The data-rich annual Index is a research-based ranking that assesses countries’ risk exposure to money laundering and terrorist financing. It is one of several excellent online tools developed by the Basel Institute to help both public- and private-sector practitioners tackle financial crime. We are excited to continue this annual dialogue between the Basel Institute and Money Laundering Watch.
Established in 2003, the Basel Institute is a not-for-profit Swiss foundation dedicated to working with public and private partners around the world to prevent and combat corruption, and is an Associated Institute of the University of Basel. The Basel Institute’s work involves action, advice and research on issues including anti-corruption collective action, asset recovery, corporate governance and compliance, and more.
Dr. Kateryna Boguslavska is Project Manager for the Basel AML Index at the Basel Institute. A political scientist, she holds a PhD in Political Science from the National Academy of Science in Ukraine, a master’s degree in Comparative and International Studies from ETH Zurich as well as a master’s degree in Political Science from the National University of Kyiv-Mohyla Academy in Ukraine. Before joining the Basel Institute, Dr. Boguslavska worked at Chatham House in London as an Academy Fellow for the Russia and Eurasia program.
This blog post again takes the form of a Q & A session, in which Dr. Boguslavska responds to several questions posed by Money Laundering Watch about the 12th Basel AML Index. We hope you enjoy this discussion of global money laundering risks — which addresses terrorist financing, de-risking, non-profits, forfeiture, emerging technologies, and more. – Peter Hardy
Continue Reading The Basel AML Index: Forfeiture, Non-Profits, Crypto, and More. A Guest Blog.
Today we are very pleased to welcome, once again, guest blogger Dr. Kateryna Boguslavska of the Basel Institute on Governance (“Basel Institute”), who will discuss the Basel Institute’s recent release of the Basel AML Index for 2022 (the “Index”). The data-rich annual Index is a research-based ranking that assesses countries’ risk exposure to money laundering and terrorist financing. It is one of several excellent online tools developed by the Basel Institute to help both public- and private-sector practitioners tackle financial crime. We are excited to continue this annual dialogue between the Basel Institute and Money Laundering Watch.
Established in 2003, the Basel Institute, an Associated Institute of the University of Basel, is a not-for-profit Swiss foundation dedicated to working with public and private partners around the world to prevent and combat corruption. The Institute’s work involves action, advice and research on issues including anti-corruption collective action, asset recovery, corporate governance and compliance, and more.
Dr. Kateryna Boguslavska is Project Manager for the Basel AML Index at the Basel Institute. A political scientist, she holds a PhD in Political Science from the National Academy of Science in Ukraine, a master’s degree in Comparative and International Studies from ETH Zurich as well as a master’s degree in Political Science from the National University of Kyiv-Mohyla Academy in Ukraine. Before joining the Basel Institute, Dr. Boguslavska worked at Chatham House in London as an Academy Fellow for the Russia and Eurasia program.
This blog post again takes the form of a Q & A session, in which Dr. Boguslavska responds to several questions posed by Money Laundering Watch about the Basel AML Index 2022. We hope you enjoy this discussion of global money laundering risks — which addresses enforcement, virtual assets, environmental crime, AML for lawyers, how the U.S. is performing, and more. –Peter Hardy
Continue Reading The Basel AML Index 2022: One Step Forward, Four Steps Back. A Guest Blog.
On April 14, 2022, the Financial Crimes Enforcement Network (“FinCEN”) issued an advisory on kleptocracy and foreign public corruption. At a high level, the advisory stresses the importance of financial institutions focusing their efforts on detecting and targeting the proceeds of foreign public corruption. This advisory aligns with President Biden’s establishment of the fight against corruption as a core national security interest, as well as FinCEN’s identification of corruption as a national priority for anti-money laundering and countering the financing of terrorism. The advisory seeks to provide financial institutions with typologies and potential indicators associated with kleptocracy and other forms of foreign public corruption, such as bribery, embezzlement, extortion, and the misappropriation of public assets. The advisory further identifies 10 financial red flag indicators to assist financial institutions in detecting, preventing, and reporting suspicious transactions associated with kleptocracy and foreign public corruption.
Continue Reading More from FinCEN to Financial Institutions on the Kleptocracy – With a Continued Focus on Russia
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
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.
On October 21, 2021, a grand jury indictment was unsealed in the Southern District of Florida charging two Venezuelan and three Colombian citizens with one count of conspiracy to commit money laundering and four counts of money laundering. The indictment revealed an alleged bribery scheme involving a former Venezuelan state governor and Venezuelan government authorities that provide food and medicine to citizens in need. A portion of the $1.6 billion in contracts secured by alleged bribes was laundered into or through the United States through a web of accounts and businesses. This indictment serves as yet another example of the United States Department of Justice’s (“DOJ”) use of money laundering charges to combat corruption in Venezuela (as we have blogged about repeatedly: here, here, here, here, here and here). It also represents another example of DOJ using the money laundering statutes to charge foreign government officials at the highest levels when the Foreign Corrupt Practices Act cannot apply.
Continue Reading (More) Money Laundering Charges Announced for Alleged $1.6 Billion Venezuelan Corruption Scheme
Meaningful Overlap or Superficial Similarities?On October 3, the release of the Pandora Papers flooded the global media, as millions of documents detailed incidents of wealthy and powerful people allegedly using so-called offshore accounts and other structures to shield wealth from taxation and other asset reporting. Data gathered by the International Consortium of Investigative Journalists, the architect of the Pandora Papers release, suggests that governments collectively lose $427 billion each year to tax evasion and tax avoidance. These figures and the identification of high-profile politicians and oligarchs involved in the scandal (Tony Blair, Vladimir Putin, and King Abdullah II of Jordan, to name a few) have grabbed headlines and spurred conversations about fairness in the international financial system – particularly as COVID-19 has highlighted and exacerbated economic disparities.
Much of the conduct revealed by the Pandora Papers appears to involve entirely legal structures used by the wealthy to – not surprisingly – maintain or enhance wealth. Thus, the core debate implicated by the Pandora Papers is arguably one of social equity and related reputational risk for financial institutions (“FIs”), rather than “just” crime and anti-money laundering (“AML”). Media treatment of the Pandora Papers often blurs the distinction between AML and social concerns – and traditionally, there has been a distinction.
This focus on social concerns made us consider the current interest by the U.S. government, corporations and investors in ESG, and how ESG might begin to inform – perhaps only implicitly – aspects of AML compliance and examination. ESG, which stands for Environmental, Social, and Governance, are criteria that set the foundation for socially-conscious investing that attempts to identify related business risks. At first blush, the two are separate fields. But as we discuss, there are ESG-related issues that link concretely to discrete AML issues: for example, transaction monitoring by FIs of potential environmental crime by customers for the purposes of filing a Suspicious Activity Report, or SAR, under the Bank Secrecy Act (“BSA”). Moreover, there is a bigger picture consideration regarding BSA/AML relating to ESG: will regulators and examiners of FIs covered by the BSA now consider – consciously or unconsciously – whether FIs are providing financial services to customers that are not necessarily breaking the law or engaging in suspicious activity, but whose conduct is inconsistent with ESG principles?
If so, then ESG concerns may fuel the phenomenon of de-risking, which is when FIs limit, restrict or close the accounts of clients perceived as being a high risk for money laundering or terrorist financing. Arguably, and as we discuss, there also would be a historical and controversial analog – Operation Chokepoint, which involved a push by the government (not investors) for FIs to de-risk certain types of customers. Regardless, interest in ESG means that FIs have to be even more aware of potential reputational risk with certain clients. Even if the money in the accounts is perfectly legal, the next data breach can mean unwanted publicity for servicing certain clients.
These concepts are slippery, involve emerging trends that have yet to play out fully, and the similarities between AML and ESG can be overstated. Nonetheless, it is possible that these two fields, both of which are subject to increasing global interest, may converge in important respects. A preliminary discussion seems merited, however caveated or subject to debate.
Continue Reading ESG, AML Compliance and the Convergence of Social Concerns
Second Post in a Series on the FATF Plenary OutcomesAs we blogged, last month the Financial Action Task Force (“FATF”) held its fourth Plenary, inviting delegates from around the world to (virtually) meet and discuss a wide range of global financial crimes and ongoing risk areas. Following the Plenary, FATF identified a number of strategic initiatives for future research and publication, and issued six reports to detail their findings on specific topics. One such report, Money Laundering from Environmental Crime (the “Report”), and its implications for anti-money laundering (“AML”) and countering the financing of terrorist (“CFT”), will be the focus of this post.
The 66-page Report is compiled from case studies and best practices submitted by over 40 countries, as well as input from international organizations like the International Monetary Fund and World Bank. While this Report is the first deep dive into environmental crimes and recommendations for members of the FATF Global Network, it is not the first time FATF has addressed environmental issues. The current Report aims to build upon FATF’s previous study on money laundering and the illegal wildlife trade, on which we also blogged. The current Report is also connected to earlier FATF studies on money laundering risks from the gold trade and the diamond trade. Indeed, the Report references U.S. enforcement cases involving money laundering and gold or diamonds on which we previously have blogged (see here, here and here).
As this post will discuss, these areas of money laundering risk are often overlooked and are especially difficult to monitor. Further, the Report finds that “[l]imited cooperation between AML/CFT authorities and environmental crime and protection agencies in most countries presents a major barrier to effectively tackle [money laundering] from environmental crimes.” Stated otherwise, government AML/financial flow experts and government environmental law experts don’t understand or even consider each other’s area of expertise, and often don’t communicate with each other, resulting in missed enforcement opportunities. With global environmental crimes generating up to $281 billion per year, the Report suggests that government interventions are not proportionate to the severity of this issue. By issuing this Report, FATF hopes to raise awareness of the scope and scale of harm caused by environmental crimes and related money laundering, and enhance collaboration by financial crime and environmental crime enforcement officials.
Continue Reading FATF Issues First-Ever Report on Environmental Crime and Money Laundering
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