[co-author: Zach Ulewicz, Summer Associate]
Note: We'd like to thank co-author Zach Ulewicz, summer associate, for contributing to this article.
Financial Crimes Enforcement Network (FinCEN) remains committed to combating money laundering, in all forms, in connection with the banking and financial systems. To this end, on June 30, 2021, FinCEN issued new sub-regulatory guidance in the form of government-wide Priorities for anti-money laundering and countering the financing of terrorism (AML/CFT), as required by the Anti-Money Laundering Act of 2020 (the AML Act). FinCEN also issued a statement providing guidance and clarity on the new Priorities for non-bank financial institutions (NBFIs)1, and a similar interagency statement was issued for banking institutions. By publishing the new Priorities, FinCEN made it clear that it was not making any immediate changes to the requirements under the Bank Secrecy Act (BSA); instead FinCEN noted it would be issuing new regulations at a “later date” that will directly address these new Priorities and “specify how financial institutions should incorporate these Priorities into their risk-based AML programs.” However, it is important for any covered financial institutions to begin assessing their current AML protocols and determine what changes may need to occur to incorporate the new Priorities. Clearly more scrutiny is coming for financial institutions as well. FinCEN identified eight Priorities:
This includes both foreign and domestic corruption that threatens national security and the global financial system. Corrupt actors misappropriate public funds, utilize bribery, or commit other criminal acts and attempt to exploit weaknesses in the U.S. financial system to cover their tracks.
2. Cybercrime, including Relevant Cybersecurity and Virtual Currency3 Considerations
This includes any illegal activities involving computers or other virtual devices. Cyber-related virtual crimes are increasingly used for theft, fraud, ransomware attacks, and other scams, while virtual currencies can be used to facilitate illegal activities and launder ill-gotten gains.
3. Terrorist Financing
This category includes both international and domestic4 terrorism and consists of (1) individuals in the U.S. providing funding to international terrorist groups and (2) financing of violent extremists or any group using force or violence to pursue ideological agendas within the U.S.
This is the largest category of illicit proceeds in the U.S. and includes bank, consumer, health care, securities and investment, and tax fraud. The profits from illegal fraud operations are then laundered in a variety of ways.
5. Transnational Criminal Organization Activity
This is a broad category that includes drug trafficking organization activity that spans across international borders. Mexican and Russian criminal organizations remain a threat, while other national organizations have been growing. These criminal organizations engage in a wide range of illegal activities, many of which are described in other Priorities.
6. Drug Trafficking Organization Activity
FinCEN notes that drug trafficking organizations often utilize professional money laundering networks, especially through China, that conduct trade-based money laundering schemes.
7. Human Trafficking and Human Smuggling
FinCEN has worked with law enforcement agencies and other organizations, and in October 2020 issued an advisory to help identify financial and behavioral indications of human trafficking, which supplemented a previous advisory from 2014.
8. Proliferation Financing
This includes a broad range of activities seeking to exploit the U.S. financial system in order to fund the development of weapons of mass destruction or state-sponsored weapons programs, often attempting to avoid UN or U.S. sanctions.
The two additional statements that were issued directed toward NBFIs and banking institutions both made clear that these Priorities were issued pursuant to the requirements of the AML Act and that there are not yet any changes to the requirements of the BSA. However, the AML Act requires that, within 180 days from the establishment of these Priorities, FinCEN will revise and issue new BSA regulations in order to incorporate the Priorities. Covered financial institutions should remain vigilant in assessing their risk-based AML programs and be ready to incorporate new changes to the BSA regulations when they are issued. Financial institutions should also expect new guidance on these revised BSA regulations when they are promulgated, as well as updates to the examination procedures for examiners. FinCEN indicated it will be issuing similar Priorities every four years.
FinCEN has issued this list of Priorities to indicate the areas of focus for the AML Act and future BSA regulation and amendment. While FinCEN has not yet issued enforcement action or other specific guidelines, covered financial institutions and covered NBFIs should begin to assess their current risk-based AML programs with these Priorities in mind. In particular, FinCEN likely will expect compliance programs to specifically address each priority as an action item. Within 180 days from the issuance of these Priorities, FinCEN will issue new regulations under the BSA for compliance. At that time FinCEN will also issue new guidance to covered institutions and updates to the examination procedures. Financial institutions should review current protocols and stay alert for new and revised regulations.
1 Common NBFIs include casinos, securities and commodities firms, money service businesses, insurance companies, venture capitalists, currency exchanges, loan or finance companies, operators of credit card systems, and others.
2 It is of note that President Biden also issued a corruption-focused memo on June 3, 2021.
3 The regulation of cryptocurrencies is becoming a high priority as they are adopted by mainstream financial institutions.
4 Especially in light of the January 6, 2021 attack on the U.S. Capitol building and the recent National Strategy for Countering Domestic Terrorism released by the White House.
5 The Priorities specifically reference the recent surge in “COVID-19-related fraud schemes.”