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If 2020 somehow failed to darken your doorstep, enter 2021, which began with a violent insurrection at the U.S. Capitol and deadly winter storm in Texas; witnessed the Taliban’s return to power and democratic norms continue to fray across the world; and saw casualties mount and supply chains buckle amid a resurgent global pandemic.

But the year also brought heroism, humanity and reasons for optimism, leading with the unprecedented rollout and delivery of more than 9 billion COVID-19 vaccinations, humanitarian workers risking their lives to help the world’s most vulnerable, and the discovery of a “hope patient” in Argentina whose immune system defeated HIV without the aid of medicine.

2021 was also significant for financial institutions in the United States and European Union, as both jurisdictions approved dramatic overhauls of their laws, regulations and broader strategies against financial crime, including plans to expand anti-money laundering supervision to new sectors of the economy and mandate the collection and distribution of ownership data.

It didn’t take long to kick off.

On Jan. 1, federal lawmakers in Washington, D.C., gave final approval to the Anti-Money Laundering Act, which required the Treasury Department to establish a framework for collecting personal data on the true owners or controllers of U.S. legal entities by the end of the year.

“Without a doubt, our top priority has been implementation of the AML Act of 2020,” said Grovetta Gardineer, a senior official with the Office of the Comptroller of the Currency. “These changes are the most significant to the national Bank Secrecy Act and AML regime since the passage of the Patriot Act in 2001.”

FinCEN, OFAC and Justice

Capitol One drew a $290 million civil monetary penalty from the U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, in January after failing to properly screen millions of dollars of checks cashed by more than 100 clients from 2008 to 2014. More

Treasury’s Office of Foreign Assets Control fined Union de Banques Arabes et Françaises, a French-headquartered bank that specializes in trade finance, $8.6 million for handling U.S. dollar-denominated transactions for blacklisted banks in Syria. More

OFAC then ordered BitPay, a cryptocurrency payments processor in Atlanta, to forfeit more than $500,000 for clearing transactions for parties in Cuba, Iran, North Korea and other blacklisted jurisdictions. More

FinCEN warned banks and other financial institutions in February to stay alert for attempts to defraud health insurance programs during the novel coronavirus pandemic. More

The bureau also flagged scams in which fraudsters mailed out batches of fake checks to individuals seeking COVID-19 financial assistance, promising to expedite payments to those who verified their banking data and other personal information online or over the telephone. More

The Financial Industry Regulatory Authority warned brokerages to watch for individuals and entities trading shares in certain overseas companies immediately after the firms have been listed on the U.S. stock exchange. More

FINRA’s senior AML director told ACAMS moneylaundering.com in an interview that brokerages continue to struggle to contain the risk of financial crime that certain low-value securities present. More

Federal witnesses and lawmakers concluded in a hearing after the attack on the U.S. Capitol that even small revisions to U.S. statutes and regulations would help the government interdict payments to the Proud Boys, Oath Keepers and other violent right-wing organizations. More

The AML Act also clarified that cryptocurrency exchanges and other businesses engaged in trading value that substitutes for mainstream currencies and other funds qualify themselves as financial institutions under the Bank Secrecy Act, and must build AML programs as a result.

FinCEN took the first step in implementing the AML Act in April, asking banks and other stakeholders in an advanced notice to comment on how the bureau should go about building and administering a federal database of beneficial owners as mandated by the legislation. More

2021 was also an unprecedented year for FinCEN in terms of leadership, as the bureau changed directors twice in four months while searching for a permanent replacement for Ken Blanco.

Former FinCEN Deputy Director Michael Mosier returned to the bureau in a temporary capacity in April after Blanco departed for a senior role at Citibank. Himamauli Das, a consultant at K2 Integrity in Washington, D.C., became acting director in August after Mosier stepped down. More

Federal prosecutors in New York accused a compliance officer of tricking the now-defunct credit union that employed him into clearing more than $1 billion in suspicious transactions for two money services businesses that he and his alleged business partner secretly controlled. More

The accused compliance officer, Gyanendra Asre, a 54-year-old resident of Greenwich, Connecticut, appeared to have a history of handling high-risk transactions from Mexico for his previous employers. More

U.S. securities regulators imposed a $1.5 million penalty in May on a brokerage in Colorado that failed to file suspicious activity reports or submitted incomplete reports on hundreds of cyberthefts. More

President Joe Biden listed the fight against corruption as a core U.S. national security interest in June, and FinCEN followed by listing eight crimes that present the highest threat to the U.S. financial system. More and More

A federal judge in New York sentenced former FinCEN official Natalie Mayflower Sours Edwards to six months in prison in June for leaking more than 2,000 suspicious activity reports to a journalist, including SARs filed on transactions tied to President Donald Trump and Paul Manafort, his former campaign director. More

In July, U.S. officials urged Congress to require American firms to report when they are victims of a significant cyberattack within 24 hours, disclose whether the operation against them involved ransomware and describe any payments they made to decrypt their networks. More

Iggy Azad, director for global intelligence at Coinbase in London, told moneylaundering.com that ransomware constituted “the predominant focal point” for regulators, law enforcement agencies and government officials on both sides of the Atlantic in 2021, which saw multimillion-dollar hacks by Russian cybercriminals against Colonial Pipeline, the U.S.’ largest oil distributor, and JBS, one of the world’s largest meat processors, as well as U.S. sanctions against an Estonian cryptocurrency exchange for helping ransomware perpetrators launder funds. More

“There are now several ransomware taskforces and there have been a number of OFAC sanctions designations,” Azad said. “Regulators have focused a lot more on the intersection between ransomware and sanctioned entities, simply because of the damage these attacks have done to a number of different industries.”

As part of a feasibility study mandated by the AML Act, FinCEN voiced conditional support for a congressional plan to give financial institutions immunity from enforcement when they employ new, potentially beneficial AML practices on a trial basis. More

FinCEN penalized five companies in the Seychelles $100 million in August after they falsely claimed that BitMEX, a cryptocurrency derivatives exchange they ran together, did not serve American customers and was therefore not bound by U.S. AML rules. More

In September, the bureau solicited feedback on more than a dozen issues related to the bureau’s plan to regulate antiquities, including the types of transactions that typify the trade, the sector’s exposure to financial crime and activities that should trigger AML requirements. More

New York’s Department of Financial Services assessed a $100 million penalty against Mashreq Bank in November for helping Sudanese parties route more than $4 billion through the United States, while OFAC and the Federal Reserve refrained from fining the Dubai-based institution and praised it for cooperating with their investigation. More

New prosecutorial guidance from the U.S. Justice Department may spell trouble for banks and other institutions seeking to avoid criminal prosecution for compliance-related infractions, especially if they qualify as repeat offenders. More

U.S. officials separately warned financial institutions that month to monitor for signs of financial crime and corruption when operating in Cambodia, where “inadequate oversight” and “minimal regulatory scrutiny” have transformed many banks into conduits for illicit funds. More

FinCEN joined the White House’s anti-corruption campaign and met yet another requirement of the AML Act in December, calling on financial institutions in a 52-page advanced notice to analyze proposals for permanently regulating and supervising the real estate industry for AML purposes. More

The bureau also drilled down on the definition of beneficial owner, the types of information that U.S.-formed legal entities or foreign entities with U.S. operations should provide, and other aspects of the database in a 188-page notice of proposed rulemaking. More

FinCEN complied with another deadline of the AML Act in the waning days of 2021 by asking financial institutions via a request for information to weigh in on possible revisions to the Bank Secrecy Act, the 1970 law that underpins federal regulations against financial crime. More

Sources told moneylaundering.com that the bureau’s new Office of the Whistleblower has begun accepting information on suspected AML violations from anonymous tipsters. More

Jim Lee, head of criminal investigations at the IRS, said in an interview that financial crime continued to evolve in 2021.

“Almost every case we investigated this past year included a cyber component, and we had to ensure that we kept pace—and continue to keep pace—with the latest technology criminals are using to commit illegal activities,” Lee said.

Across the pond

In January, Britain’s HM Revenue & Customs fined MT Global Limited, a small money services business in Luton, England, £23.8 million, marking the agency’s largest AML-related penalty to date. More

In June, Britain’s Crown Prosecution Service announced plans to view failures by compliance officers to report suspicious funds as criminal violations going forward, irrespective of their legal or illegal origin. More

In July, the U.K. Financial Conduct Authority, or FCA, advised lenders to flag companies they suspect of having fraudulently obtained loans under the Bounce Back Loan Scheme, a government-run financial aid program designed to shelter companies from the economic fallout of COVID-19. More

Three years after tagging U.K. online casino Daub Alderney with a £7.1 million penalty for breaking AML rules and not protecting “vulnerable consumers,” the U.K. Gambling Commission fined the company another £6 million in September for not preventing “problem gambling.” More

Southwark Crown Court in London handed a suspended jail sentence to Dominic Thorncroft, the former head of an industry group that represents money services businesses, after convicting him of breaching AML rules and “retaining a wrongful credit.” More

“While that was a Metropolitan Police case, it’s all part of a collaborative strategy to remove bad actors from the MSB sector,” said Nick Sharp, deputy director for economic crime at HM Revenue & Customs, the U.K. tax authority, which also supervises money services businesses, company formation agents and other sectors for AML purposes.

HMRC continued to focus on MSBs, accountants, real estate agents, and trust and company formation services providers in 2021, with the number of live investigations approaching 150 by year’s end.

“We’re also a supervisor [of those sectors], so anything in that overlapping space relevant to a profession of interest to HMRC, that’s where we’re strategically trying to use those powers [of criminal prosecution] the most,” Sharp said. “There are also other considerations, such as the impact of a case and suspected links to organized crime, and where you’re dealing with higher value transactions.”

An attorney representing the NCA told a U.K. court in October that the regulator would seek a record £340 million penalty against NatWest in October after the global lender became the first financial institution in Britain to plead guilty to criminal charges of violating AML rules. More

A judge ultimately imposed a £265 million penalty following NatWest’s admission of guilt. More

Days later, the FCA fined HSBC £64 million for transaction-monitoring failures that persisted from 2010 to 2018 despite internal warnings and unprecedented government scrutiny following the lender’s record $1.9 billion AML settlement with U.S. authorities in 2012. More

U.S. and U.K. officials jointly assessed $475 million in penalties and forfeitures from Credit Suisse in response to the Zurich-headquartered bank’s admitted role in a massive loan fraud and embezzlement scheme in Mozambique. More

Europe

Swiss regulators censured four former senior managers of Swiss private lender Julius Baer in January for allowing hundreds of millions of dollars in suspicious funds to flow into the private lender from South America, but Swiss officials and lawmakers failed to pass meaningful AML reforms. More and More

Julius Baer admitted four months later to clearing more than $36 million in bribes through New York to executives of FIFA and other soccer organizations from 2013 to 2015. More

The British Crown Dependency of Jersey ordered three subsidiaries of Societe Generale to pay a record £720,000 in penalties in February for disregarding warnings to address “significant and material” AML violations. More

In Germany, compliance officers and investigators continued to probe last year’s attempts to defraud the government’s €353 billion COVID-19 assistance package. More

For digital lender N26, the greatest challenge arose from e-commerce cyberfraud and related money-mule schemes amid a spike in online sales during the pandemic, said Stephan Niermann, the firm’s Berlin-based director of group compliance and licensing.

“Ultimately, we need a safe way of payment in e-commerce across the EU,” Niermann said. “Upfront SEPA [single euro payments area] or pre-payments are not safe enough for consumers.”

German authorities ended February by accusing neo-Nazi groups of laundering an unspecified sum of euros from trafficking drugs and weapons. More

French regulators fined ING’s local subsidiary €3 million and the insurance wing of BNP Paribas €2.5 million for AML failures, and closed the year by fining MMA, France’s largest insurance company, €4.5 million for sanctions-related shortcomings. More, More and More

“The year was similar to 2020 in the sense that the COVID pandemic continued to have a significant impact on criminal groups who were able to adapt and even take advantage of it,” said Thomas de Ricolfis, director of France’s new Anti-Financial Crimes Sub-directorate. “The estimated losses are significant but should be put into perspective with regard to the amount of money distributed.”

Europol’s Economic and Financial Crime Center, or EFECC, completed its first full year of operation in 2021, supporting 88 “priority” cross-border investigations that resulted in nearly 1,500 arrests and the seizure of €780 million of assets.

“I believe this was the right time to create this center of competence,” EFECC director Burkhard Muhl told moneylaundering.com. “Financial crime is increasing quite rapidly, particularly in the context of fraud, closely followed by money laundering.”

ABN AMRO agreed to pay the Netherlands €480 million in April after having systemically violated AML rules from 2014 to 2020, while Dutch authorities opened criminal investigations into three of the bank’s former executives. More

Belgian authorities came to suspect that illegal bets in cryptocurrency increased after learning that individuals involved in fixing matches and handling wagers without a license had begun converting more and more bitcoins into banknotes. More

Latvia’s Financial and Capital Markets Commission fined Rietumu Banka a record €5.9 million in June after consecutive examinations found an “incomplete internal regulatory framework in the field of AML and lack of customer due-diligence quality control.” More

A regional affiliate of the Financial Action Task Force reported that month that Cyprus, Malta and other, mostly smaller European nations still fall far short of meeting their obligation to gauge their exposure to illicit finance, use financial intelligence effectively and assist foreign investigations into financial crime. More

Malta became the first EU nation to land on FATF’s gray list of jurisdictions after failing to complete several recommended upgrades to its AML regime. More

On July 20, the European Commission formally proposed to create an EU-wide AML Authority, eliminate differences between the AML rules of the bloc’s 27 nations, subject the “widest possible range of legal entities and arrangements” to beneficial-ownership rules and extend anti-financial crime requirements to all virtual asset service providers. More and More

Individuals who use offshore legal entities and trusts to buy property in the EU will have to identify themselves under a regulation contained within the plan, but the measure appears to exclude smaller banks from direct supervision by AMLA. More and More

“We’re also setting up a central AML database, where national supervisors have to share information on material weaknesses that they have identified in financial institutions’ systems and controls,” said Carolin Gardner, head of AML Unit at the European Banking Authority. “We started to build this database in 2021 and it’s going to be operational in January.”

Awareness of money laundering and terrorist financing risks among prudential supervisors also increased significantly in 2021, partially as a result of an agreement to share information with other regulators, said Gardner.

“There have been more than 700 exchanges under this agreement so far, whereas before this agreement there was no exchange, or very limited exchange,” she said. “We’re not fully there yet, but we’re going in the right direction.”

In July, the Vatican charged Cardinal Giovanni Angelo Becciu and nine other individuals with various counts of fraud, money laundering, and abuse of office in relation to a property deal in London on which the Holy See lost millions of dollars.

Switzerland’s Office of the Attorney General officially ended an investigation into how most of the $230 million linked to a tax fraud in Russia ended up in Swiss banks. More

After assessing a €2 million fine against American Express, France’s Autorite de Controle Prudentiel et de Resolution warned banks against farming out their AML programs to third parties without monitoring how they implement them. More

In September, an industry panel in the Netherlands cleared former chief executive Ralph Hamers and 14 other senior executives of ING of egregiously violating the Dutch Banker’s Oath by failing to prevent systemic AML violations. More

Weeks out from the launch of a global evaluation of Germany’s AML regime, state police in Lower Saxony raided the Justice and Finance ministries in Berlin as part of an investigation into the German FIU’s alleged withholding of financial intelligence from law enforcement. More

Sweden’s head of banking supervision criticized Danske Bank’s chief executive and chairman in October for the Danish lender’s apparently poor grasp of its unique vulnerabilities to financial crime and plans to wait at least until 2023 to eliminate the shortcoming. More

Guidance pitched by the European Banking Authority in August would obligate financial institutions to give senior AML staff direct access to their boards of directors, and adequate resources to perform their mission. More

Switzerland’s Federal Criminal Court ended the year by convicting Falcon Private Bank of laundering hundreds of millions of dollars stolen from 1MDB. The criminal conviction is Switzerland’s first against a lender. More

The Taliban’s conquest of Afghanistan placed reports of suspicious transactions and the Afghan financial services professionals who filed them at risk, sources told moneylaundering.com. More

The loss of Afghanistan also raised questions over the FBI’s closure of the Terrorist Financing Operations Section, and may have given al-Qaida and other blacklisted organizations additional channels to raise and move funds, sources told moneylaundering.com. More

Another year, another leak

In October, the International Consortium of Investigative Journalists, The Washington Post and other media outlets published the Pandora Papers, a cache of millions of documents outlining the extent to which company formation agents, trust services providers and other offshore entities in dozens of nations facilitate secretive, potentially illicit transactions.

Days after the leak, FATF announced plans to advise nations to build ownership databases, verify the data they receive, enhance their supervision of legal entities formed overseas and ban bearer shares. More

U.S. lawmakers responded to the leak with plans to expand AML requirements to accountants, real estate agents, attorneys and other professionals. More

By exempting statutory trusts and more than 20 other types of entities from having to disclose their beneficial owners, an earlier piece of legislation, the AML Act, may actually enable similar schemes going forward. More

The Egmont Group of Financial Intelligence Units, a global platform based in Toronto, Canada, warned nations against using financial intelligence and financial crime investigations as weapons to discredit and silence political adversaries and nonprofits in their jurisdictions. More

In May, the former U.S. president of FATF accused Russia’s FIU, Rosfinmonitoring, of assisting the Kremlin in moving illicit funds and helping President Vladimir Putin stay in power. More

FATF’s executive secretary stepped down in October after six years in the position, and raised questions over the group’s ability to operate free of political influence. More

Canada

The Financial Transactions and Reports Analysis Centre of Canada, or Fintrac, ended the year by fining the Industrial and Commercial Bank of China CA$700,000 for failing to flag suspicious transactions and manage the risks posed by certain clients. The penalty was Canada’s first against a bank in more than five years. More

Canada’s second largest penalty arrived in November, when Fintrac disclosed a $256,000 fine against Vancouver-based Arc Realty for failing to develop a written compliance program, appoint a senior executive to oversee adherence to AML rules, and other violations.

Efforts to update Canada’s AML regime won limited praise this year from FATF.

In October the intergovernmental group identified Canada’s implementation of stronger due-diligence requirements for foreign politicos, faster timelines for reporting suspicious activity and greater expectations for non-bank financial companies as key improvements.

“This [update] is welcome news for us because we’ve been focused a lot on the gaps that we need to fill, and it’s great recognition that Canada is taking steps,” Tamara Trotman, director of financial crimes, governance and operations for the country’s Finance Department, said during a panel of the ACAMS Canada Virtual Conference in November.