News

With new leaders at federal banking agencies and key offices of the Treasury Department, the White House stands poised to implement a more risk-based, technology-centric approach to supervision and compliance, analysts told ACAMS moneylaundering.com.

On July 23, the Senate confirmed veteran financier and asset manager John Hurley to run the Office of Terrorism and Financial Intelligence, or TFI, weeks after confirming the nomination of Jonathan Gould, a former director for BlackRock, to lead the Office of the Comptroller of the Currency, or OCC, which supervises more than 1,000 banks for anti-money laundering purposes.

A third appointee, former congressional staffer Travis Hill, has chaired the Federal Deposit Insurance Corp., or FDIC, on an acting basis since Jan. 20, though moving into the role more permanently would also require Senate confirmation.

Their appointments promise to accelerate the shift in focus away from procedural violations towards a narrower set of high-impact, financial crime-related threats to national security, while giving banks a green light to embed artificial intelligence and other new technologies in their anti-money laundering programs, said former OCC attorney Brendan Clegg.

“Where I think a change will occur under their leadership is in the approach exam staff takes to supervision,” Clegg told moneylaundering.com. “They’ll direct staff to focus on areas posing the greatest risks … instead of on checking that banks tick every box.”

After serving as senior deputy comptroller and chief counsel at the OCC during the first Trump administration, Gould worked as chief legal officer for Bitfury, an Amsterdam-headquartered blockchain company, and most recently as a partner at Jones Day, where he advised banks and other financial institutions on regulatory matters.

Hill, who has held various senior positions at the FDIC since July 2018, laid out 15 near-term priorities upon taking office in January, including “modernizing” the implementation of the Bank Secrecy Act, or BSA, and taking an “open-minded” view of innovation and technology.

Clegg, now a partner with Luse Gorman in Washington, D.C., said an early, “concrete example” of modernization arrived in June, when the OCC, FDIC and other agencies gave banks permission to collect taxpayer identification numbers, or TINs, from third parties instead of from customers.

By permitting banks to collect Social Security numbers and other TINs from external sources, the agencies aim to reduce the regulatory burden that comes with onboarding.

Under Hill’s stewardship, FDIC examiners may need to become more “comfortable” with the latest artificial intelligence-driven transaction-monitoring systems and other new technologies, said Clegg.

“I think that Hill, in contrast to leaders of the banking agencies under [previous] administrations, will actually support institutions in adopting innovative approaches to compliance, and direct exam staff to show that support on the ground,” said Clegg. “It will take a while for direction, in terms of the supervisory approach, to filter down.”

Gould and Hill have publicly criticized banks for withholding services from cryptocurrency platforms, payday lenders, fossil-fuel companies and other businesses that purportedly carry “reputational” baggage. Hill has also condemned the FDIC’s previous focus on climate-related financial-crime risks.

The American Fintech Council, or AFC, whose 130-odd members include major payment platforms such as Affirm and Global Payments, credit reporting bureaus, student loan servicers and other institutions, welcomed the appointments of Hill, Gould and Hurley.

Last month, the trade group urged the OCC to adopt a “forward-looking” approach, including by supporting bank-fintech partnerships and ensuring that examiners consider each company’s unique business model and particular exposure to financial crime, especially at smaller institutions.

“Each [of the Trump appointees] has shown a deep understanding of relevant policy issues and the importance of responsible innovation,” Ian Moloney, head of policy and regulatory affairs at the AFC, told moneylaundering.com. “Collectively, they are well suited to pursue necessary modernization efforts in a way that avoids concern about regulatory arbitrage.”

Priorities

At TFI, Hurley will shape the policy, strategy and operations of Treasury’s Office of Foreign Assets Control, Office of Intelligence and Analysis, Office of Terrorist Financing and Financial Crimes, Financial Crimes Enforcement Network, or FinCEN, and Executive Office for Asset Forfeiture.

A Gulf War veteran and founder of the Calvary Management Group, a wealth-management fund in San Francisco, Hurley served on the President’s Intelligence Advisory Board during Trump’s first term and as a board member for the Stimson Center, a nonpartisan think tank in Washington, D.C., but has no previous, direct experience in government.

His primary task consists of implementing U.S. national-security priorities as they pertain to illicit finance, including by expanding the federal crackdown on cartels in Latin America, money laundering organizations linked to China, and cybercriminals and sanctions evaders.

During his confirmation hearing in April, Hurley told lawmakers that he shared their concerns over the growing use of cryptocurrency by U.S. adversaries such as North Korea to launder funds, and voiced support for broadening FinCEN’s role in preventing criminals from accessing mixers, tumblers and other methods to obfuscate the origin of their funds.

Hurley also pledged to redouble efforts to prevent China and Iran from circumventing U.S. sanctions, and vowed to impose tougher restrictions on companies linked to the Chinese military.

Gould, Hurley and Hill have taken office amid a debate over whether the Trump administration’s ultimate goal is to undermine federal efforts against corruption, money laundering and other financial crimes or only redirect them, including by weakening BSA-related enforcement.

Scott Greytak, deputy executive director of Transparency International’s U.S. branch, said he expects FinCEN to revive a proposal pitched under then-President Joe Biden that would direct financial institutions to regear their anti-money laundering programs towards high-risk clients as they see fit.

This time, however, the bureau could omit several baseline requirements from the proposal, including an obligation for financial institutions to assess how their products and services, geographical footprint and other unique characteristics expose them to illicit finance.

“I don’t think it’s going to bode well for folks who appreciated the previous administration’s more aggressive stance on enforcement, and its recognition of the problem of illicit financing and corruption,” Greytak told moneylaundering.com. “If the past six months is any indication, you’re going to see things go in a more de-regulatory direction.”

Contact Charlie Passut at cpassut@acams.org