FinCEN puts financial institutions on notice with first AML/CFT priorities

The guidance shared Wednesday comes pursuant to the Anti-Money Laundering Act of 2020 passed as part of the country’s 2021 defense spending bill that survived a veto attempt by former President Donald Trump. The announcement of the priorities requires no immediate action, but FinCEN suggested financial institutions begin preparing for changes to the Bank Secrecy Act (BSA) that are expected to be announced by the end of this year.

“Today’s publication of government-wide AML/CFT Priorities is a significant milestone in FinCEN’s efforts to improve the efficiency and effectiveness of the nation’s AML/CFT regime and to foster greater public-private partnerships,” said Acting FinCEN Director Michael Mosier in a press release. “The Priorities reflect the U.S. Government’s view of the threat landscape—highlighting longstanding threats like corruption, fraud, and international terrorism, as well as rapidly evolving and acute threats, such as domestic terrorism, and ransomware and other cybercrime.”

The AML Act requires that FinCEN announce related regulations within 180 days of the establishment of the AML/CFT priorities. The agency, along with its banking regulator peers—the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency—is planning to revise the BSA to address how the priorities will be incorporated into banks’ compliance requirements.

“Banks are not required to incorporate the AML/CFT Priorities into their risk-based BSA compliance programs until the effective date of the final revised regulations,” said the regulators in an interagency statement. “Nevertheless, in preparation for any new requirements when those final rules are published, banks may wish to start considering how they will incorporate the AML/CFT Priorities into their risk-based BSA compliance programs, such as by assessing the potential related risks associated with the products and services they offer, the customers they serve, and the geographic areas in which they operate.”

FinCEN consulted with other offices of the Treasury Department as well as law enforcement and national security agencies in determining the list.

Eight priorities

In no particular order, the AML/CFT priorities are as follows (quotes attributed to FinCEN):

1. Corruption. FinCEN cited President Joe Biden’s recent memo establishing combating corruption as a national security priority as evidence for the need to pay particular attention to this area.
2. Cyber-crime, including common threats like social engineering, software vulnerability exploits, and network attacks. “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.”
3. Terrorist financing—both international and domestic. “Covered institutions are reminded of existing obligations to identify and file SARs (suspicious activity reports) on potential terrorist financing transactions, as appropriate, and follow applicable requirements for reporting violations requiring immediate attention.”
4. Fraud, which is believed to generate the largest share of illicit proceeds in the United States. Healthcare fraud is a particular area of concern, with the COVID-19 pandemic requiring attention toward schemes involving economic impact payments, health insurance, unemployment insurance, counterfeit vaccines, and more.
5. Transnational criminal organization activity, particularly Mexican and Russian operations in the United States.
6. Drug trafficking organization activity, which includes proceeds that may be laundered in or through the United States in addition to the drugs themselves.
7. Human trafficking and human smuggling, which “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.”
8. Proliferation financing and proliferation support networks. “Global correspondent banking is a principal vulnerability and driver of proliferation financing risk within the United States due to its central role in processing U.S. dollar transactions, which comprise a substantial proportion of cross-border trade.”

The AML Act requires that FinCEN update its priorities every four years to reflect new or evolving threats.