Corruption and Cybercrime Top List of U.S. Anti-Money-Laundering Concerns

The U.S. Treasury Department on Wednesday issued a wide-ranging set of national anti-money-laundering priorities, naming corruption and cybercrime among the areas where financial institutions should focus their compliance resources.

The list is the first created by the Treasury’s Financial Crimes Enforcement Network, or FinCEN, following a major overhaul of U.S. anti-money-laundering laws in January. Legislation passed by Congress required FinCEN to develop a national strategy for countering money laundering and terrorism financing and to issue a list of priorities every four years.

Financial industry groups had advocated to make the prioritization effort a part of the anti-money-laundering act, hoping it would enable their members to more efficiently allocate their compliance resources. A survey by LexisNexis Risk Solutions estimated the projected total cost of financial crime compliance globally would be nearly $214 billion this year. FinCEN receives about 3 million suspicious activity reports annually, according to the agency.

The Bank Policy Institute said in a statement that the industry group welcomed the publication of the priorities.

“Plenty of work remains to turn these priorities into rules around implementing these priorities into AML programs, but we look forward to engaging with FinCEN and consider the announcement an encouraging first step,” said Angelena Bradfield, a senior vice president for the Bank Policy Institute.

But the list released by FinCEN on Wednesday leaves few, if any, areas of transnational crime unmentioned, leaving some compliance experts concerned the new process could simply increase the sector’s overall regulatory burden. In addition to corruption and cybercrime, the list also names domestic and international terrorism, drug and human trafficking, and a wide range of frauds and organized crimes.

“This was a real opportunity to focus financial intelligence in the U.S. in a way that could create better outcomes for everybody,” said Jeremy Kuester, a former FinCEN official and a counsel at law firm White & Case LLP. “Prioritization is the way to do it, but these aren’t priorities, they are just general topics.”

FinCEN and a number of other regulatory agencies involved in creating the priorities said in a joint statement Wednesday that their publication wouldn’t create immediate changes to the sector’s regulatory obligations.

The Treasury unit said it would issue regulations later clarifying how financial institutions should incorporate the priorities it had identified into their compliance programs. The anti-money-laundering act gives FinCEN 180 days after publishing the priorities to issue the regulations.

The Treasury unit also is working to implement other parts of the anti-money-laundering overhaul law, including the creation of a corporate ownership database, which lawmakers hope will limit the use of anonymous shell companies. Mr. Kuester said he hoped forthcoming rule-making efforts could lead to a more sophisticated approach to helping banks more efficiently fight financial crimes.

The divergence between what financial institutions had pushed for and the outcome presented Wednesday stems in part from a disconnect between the industry and policy makers over what risk looks like on a day-to-day basis for banks, according to Chip Poncy, a co-head of the financial crimes practice at risk and compliance firm K2 Integrity.

When deciding whether to file a suspicious activity report, financial institutions are often looking at a transaction that has inaccurate, incomplete or out-of-date information, or assessing whether it is unusual for another reason altogether, he said. Rarely do they get to a place where they are able to link a transaction to one of the priorities listed by FinCEN.

“All the time, resources and money are spent getting to a determination of whether it is one of these priorities,” Mr. Poncy said. “Nine out of 10 times, you never even know.”

Although the priorities may not come as a surprise to most compliance professionals, Mr. Poncy said the new process will hopefully fuel an extended dialogue on what is needed to make the U.S.’s anti-money-laundering safeguards more effective.

“It’s just not going to scratch the itch of people who wanted it to be clearer where we should spend our time. That was not a realistic expectation,” he said. “The bigger issue is: If we’re not getting real relief through this, how do we?”

Article credit: https://www.wsj.com/articles/corruption-cybercrime-top-list-of-u-s-anti-money-laundering-concerns-11625069031