Donald Rumsfeld died yesterday. When the definitive history of the 21st century is written, no one man may play a more central role than Rumsfeld. The reason? He led America into its disastrous war in Iraq. Not only was the basis for the war an outright lie, that Saddam Hussein had weapons of mass destruction, but the tactics used during the war and during the peace seriously damaged any hope of a long-term solution. Of course, there was over 4,000 American war dead and 22,000 wounded as well and the cost of over $1.92 trillion.
What were some of the direct results of the invasion of Iraq? Several come to mind; the loss of American prestige in the world, the inability to subdue the Taliban in neighboring Afghanistan, the loss of life for all involved, the unwarranted cost which led to the financial crisis of 2007-08 and the destabilization of the entire region. Rumsfeld is the only US Secretary of Defense to serve two non-continuous terms under two different Presidents. According to his New York Times (NYT) obituary, “1975 to 1977 under President Ford, and 2001 to 2006 under President Bush. He also was the youngest, at 43, and the oldest, at 74, to hold the post”. He resigned in disgrace in 2006, sullying what had been an exemplary career in government service up until he led the US to invade Iraq. As his obituary noted, military experts “faulted his handling of the Iraq war, held him to account for the mistreatment of prisoners, and said he had alienated colleagues and the public with his imperious style.” His epithet may well be the phrase “unknown knowns” — or as he explained “the things you think you know, that it turns out you did not.” Turns out there was lots Rumsfeld did not know.
I use that last phrase to introduce today’s topic of the Financial Crimes Enforcement Network (FinCEN) issuing, according to its Press Release, “the first government-wide priorities for anti-money laundering and countering the financing of terrorism (AML/CFT) policy (the “Priorities”)… The Priorities identify and describe the most significant AML/CFT threats currently facing the United States.”
Dylan Tokar said in the Wall Street Journal, “The U.S. Treasury Department on Wednesday issued a set of national anti-money-laundering priorities, naming corruption and cybercrime among the areas where financial institutions should focus their compliance resources.” Yet I see broader implications for non-financial institutions as well. FinCEN also issued two statements to provide guidance to covered institutions on how to approach the Priorities. The first is the Statement on the Issuance of the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) National Priorities (the “Statement”) and the second is the Anti-Money Laundering and Countering the Financing of Terrorism National Priorities (the “Priorities). They are both very significant to the compliance professional.
According to the Priorities, they are, “in no particular order: (1) corruption; (2) cybercrime, including relevant cybersecurity and virtual currency considerations; (3) foreign and domestic terrorist financing; (4) fraud; (5) transnational criminal organization activity; (6) drug trafficking organization activity; (7) human trafficking and human smuggling; and (8) proliferation financing. The establishment of these Priorities is intended to assist all covered institutions in their efforts to meet their obligations under laws and regulations designed to combat money laundering and counter terrorist financing.” For US public companies this means that standards which currently do or may apply to financial institutions will move to non-financial institutions going forward. You should be prepared to answer questions about your compliance program going forward for each one of them. The Priorities sets them out in greater details as follows.
- Corruption. This Priority builds upon National Security Study Memorandum issued by President Biden on June 3, 2021, as corruption fuels instability and conflict and undermines economic growth, reducing global gross domestic product by between 2 and 5 percent. Moreover, “Corruption undermines democratic institutions and underpins many of the global challenges of our time, to include serious human rights abuse, and has a disproportionate impact on the poor and most vulnerable. For all of these reasons, countering corruption is a core national security interest of the United States. Addressing the money laundering risks associated with such corruption will bolster efforts to counter corruption.”
- Cybercrime. This Priority is “broadly defined as any illegal activity that involves a computer, another digital device, or a computer network. Cybercrime includes common cybersecurity threats like social engineering, software vulnerability exploits, and network attacks. Cybercrime is a significant illicit finance threat: the size, reach, speed, and accessibility of the U.S. financial system make covered institutions attractive targets to criminals, including terrorists and state actors.” Here, “Treasury is particularly concerned about cyber-enabled financial crime, ransomware attacks, and the misuse of virtual assets that exploits and undermines their innovative potential, including through laundering of illicit proceeds.”
- Foreign and domestic terrorist financing. This Priority includes both international and domestic terrorists. Both sets of groups, focus “on accessible targets like civilians, law enforcement and the military, symbols or members of the U.S. government, houses of worship, retail locations, and mass public gatherings.” Their selection of these types of targets, in addition to the insular nature of “radicalization and mobilization to violence and their limited discussions with others, challenges law enforcement to detect and disrupt the activities of DVEs before they occur.”
- Fraud. This Priority relates that “crimes that generate the bulk of illicit proceeds in the United States are fraud, drug trafficking, human smuggling, human trafficking, organized crime, and corruption. Among those, fraud—such as bank, consumer, health care, securities and investment, and tax fraud—is believed to generate the largest share of illicit proceeds in the United States…Proceeds from fraudulent activities may be laundered through a variety of methods, including transfers through accounts of offshore legal entities, accounts controlled by cyber actors, and money mules.”
- Transnational criminal organization activity. This Priority notes, “Transnational criminal organizations operating in the United States, including drug trafficking organizations, are priority threats due to the crime-terror nexus and their engagement in a wide range of illicit activities, including cybercrime, drug trafficking, fraud, wildlife trafficking, human smuggling, human trafficking, intellectual property theft, weapons trafficking, and corruption. Treasury has noted that a number of these groups operate in the United States, and Mexican and Russian TCOs operating in the United States remain priority threats.”
- Drug trafficking organization activity. This Priority states, “Illicit drugs continue to generate significant proceeds for Drug Trafficking Organizations… There has been a substantial increase in complex schemes to launder proceeds from the sale of narcotics by facilitating the exchange of cash proceeds from Mexican Drug Trafficking Organizations to Chinese citizens residing in the United States, including the use of front companies or couriers to deposit cash derived from the sale of narcotics into the banking system. These schemes allow Drug Trafficking Organizations to repatriate proceeds to Mexico and sidestep Chinese capital flight restrictions.”
- Human trafficking and human smuggling. Under this Priority, “Financial activity from human trafficking and human smuggling activities can intersect with the formal financial system at any point during the trafficking or smuggling process.” Moreover, “human trafficking and human smuggling networks use a variety of mechanisms to move illicit proceeds, ranging from cash smuggling by individual victims to sophisticated cash smuggling operations through professional money laundering networks and criminal organizations. The illicit proceeds from human trafficking can include income associated with logistics, such as housing and transportation of victims, as well as earnings from the exploitation of victims.
- Proliferation financing. This Priority says, “the principal threat of proliferation financing arises from proliferation support networks. These networks of individuals and entities, such as trade brokers and front companies, seek to exploit the U.S. financial system.”
The significance of these Priorities for the compliance professional cannot be overstated. As the US government now identifies corruption as a national security issue, it will vigorously pursue US companies who engage in bribery and corruption in violation of laws such as the Foreign Corrupt Practices Act (FCPA). But the work of the US government will be broader than simply the FCPA to fight corruption. Every public and private non-financial institution in the US should be prepared to have compliance programs in place for each of these priorities.
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