FATF Set to Criticize, and Praise, US AML Efforts

By Colby Adams

An intergovernmental group tasked with monitoring how effectively nations fight money laundering and terrorist financing is set to criticize the United States for failing to address several long-term legal and regulatory deficiencies.

The Paris-based Financial Action Task Force, in its first mutual evaluation of the United States in 10 years, will single out weaknesses in U.S. supervision of attorneys, company formation agents, real-estate professionals and other nonbank industries, sources told ACAMS

The report, however, will also praise U.S. rules mandating the flow of suspicious activity reports and other leads from financial institutions to federal investigators as “exemplary,” said Nicholas Burbidge, a senior advisor with Canada’s Office of the Superintendent of Financial Institutions, who participated in the assessment.

The evaluation represents the first time the United States will receive one of four possible grades for each of 11 “immediate outcomes” measuring the effectiveness of a country’s rules against financial crime. The new grading system, which FATF introduced in 2012 alongside a revised set of technical standards, is expected to prod countries to enforce the measures they adopt.

Despite the positive assessment of U.S. financial intelligence efforts, shortcomings in the supervision of attorneys and other “gatekeeper” professions will inform a less than ideal score for the country in the third outcome of the efficacy review, and a “partially compliant” rating for at least one of the group’s 40 recommendations, said Burbidge, who discussed the evaluation at the ACAMS 4th Annual AML & Financial Crime Conference-Canada in Toronto.

Those negative findings will echo the results of the 2006 assessment in which FATF rated the United States deficient in six of the group’s then-49 standards. FATF that year also criticized U.S. efforts to obtain data on beneficial owners of corporations, or require financial institutions to identify the owners of companies for whom they maintain accounts.

“In the United States, the issue is the ease with which people can form shell companies, and then the difficulty in tracking down who they are, in addition to the lack of coverage of designated nonfinancial businesses and professions,” said Burbidge.

During the FATF assessment, the U.S. Treasury Department finalized its new customer due-diligence rule requiring financial institutions to identify significant shareholders of businesses for whom they maintain accounts, though institutions have until May 2018 to be in full compliance with the rules.

The mutual evaluation will be published by late November or early December after American officials have been given a chance to review it for factual accuracy, Burbidge said.

Most, if not all, of the countries evaluated in the four years since FATF unveiled its new grading systems have been rated noncompliant or partially compliant with some of FATF’s most important technical standards, especially those pertaining to customer due-diligence and collection and access to data on beneficial owners.

Topics : Anti-money laundering , Counterterrorist Financing
Source: U.S.: Federal Reserve Board , U.S.: OCC , U.S.: FDIC , U.S.: FinCEN , U.S.: SEC , U.S.: NYS Department of Financial Services , U.S.: NCUA , U.S.: Department of Treasury , U.S.: OFAC , U.S.: IRS , U.S.: National Futures Association , U.S.: Manhattan District Attorney
Document Date: October 26, 2016