For the first time, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, has issued national policy on anti-money laundering (AML) and countering the financing of terrorism (CFT). Eight priorities, established in consultation with several other federal government agencies, reflect the most significant current threats to AML/CFT and will be updated every four years as required by the Anti-Money Laundering Act of 2020. All organizations should review these priorities as they continue to develop their AML/CFT programs.
The National Security Study Memorandum issued by President Biden on June 3, highlights how corruption fuels instability and undermines economic prosperity. The undermining of democratic institutions often leads to human rights abuses and disproportionate effects on the poor and most vulnerable. Countering corruption has been and remains an interest of national security for the United States.
Cybercrime has exploded in recent years, with several high-profile incidents making headlines during the COVID-19 pandemic. With recent attacks on critical infrastructure, ransomware has moved to the forefront of this trend. Criminals favor CVC (convertible virtual currency, also known as cryptocurrency) as the payment method for ransomware attacks, and to traffic child exploitation material, illicit drugs and other contraband online. CVC is a critical asset to cybercriminals because it affords anonymity and ease in layering transactions and integrating them back into the financial system.
FinCEN recommends greater institutional transparency and increased information sharing under a safe harbor provision of the Bank Secrecy Act, which offers protections from civil liability to encourage reporting of potential money laundering or terrorist financing schemes.
Combating the financing of terrorism has been a top priority of FinCEN since the 9/11 attacks. Terrorists require financing to conduct operations, recruit and coordinate logistics—but such transactions are generally hard to detect through traditional means, as most are conducted at low volume with high velocity. To counter terrorist financing, institutions must comply with the standards set forth in sanctions programs, have sufficient AML programs in place, and maintain awareness of individuals on government watchlists.
Fraud is one of the most common sources of illicit proceeds, infiltrating all economic sectors. COVID-19 has led to an increase in schemes involving economic impact payments, health insurance and health care, unemployment insurance, counterfeit COVID-19 vaccine records, market manipulation such as pump-and-dump, and other cyber-enabled fraud. Concern regarding foreign intelligence entities has also grown, as these entities may fund espionage operations or influence campaigns to gain access to individuals and intellectual property.
Transnational criminal organizations
Transnational criminal organizations operating in the United States, Mexico, Russia, and other nations engage in cybercrime, drug trafficking, fraud, wildlife trafficking, human smuggling and trafficking, intellectual property theft, weapons trafficking and corruption. Malign state actors provide these organizations a safe haven to conduct criminal activity in exchange for financial or political gain that includes undermining public confidence in a target nation’s government.
Fentanyl distribution to the United States by Mexican drug trafficking organizations is on the rise, while direct shipments from China have decreased—bolstered by complex laundering schemes to move the proceeds from Mexican organizations to Chinese citizens residing in the United States.
Mexican organizations rely on powerful money laundering networks based primarily in China to facilitate currency exchanges. Drug trafficking organizations repatriate proceeds to Mexico and sidestep Chinese capital flight restrictions.
Human trafficking and smuggling
Human trafficking and smuggling has also made recent headlines due to the growing visibility of networks that use multiple subnetworks, shell companies and smuggling operations to move and conceal illicit profits. FinCEN issues advisories to assist law enforcement agencies, nonprofits and the financial sector in identifying financial and behavioral red flags alerting to potential human trafficking and smuggling.
Networks of individuals and entities, such as trade brokers and front companies, exploit the U.S. financial system to acquire weapons of mass destruction as well as weapon delivery systems and components, and to develop state-sponsored weapons programs that evade United Nations or U.S. sanctions.
Because it processes dollar transactions, correspondent banking activity in the United States generally drives and funds this activity. FinCEN calls out Iran, North Korea and Syria as the major countries exploiting global supply chains and maritime transportation to facilitate the proliferation of weapons of mass destruction.
How to protect your business
RSM’s anti-money laundering and regulatory compliance practice can help you mitigate risks attributed to these eight priorities through our comprehensive services, including AML sanctions program development, build-outs, risk assessments and model validations.