As we close the book on our latest annual conference in Florida, the editorial staff at ACAMS moneylaundering.com rewinds the footage, takes a fresh look at our notes and shares some of what we learned with our readers.
Still sorting through the wreckage of Silicon Valley Bank, Signature Bank and First Republic, senior anti-money laundering regulators with the Federal Deposit Insurance Corp., Federal Reserve and Office of the Comptroller of the Currency shared some of the lessons those failures have imparted during the opening roundtable on Tuesday.
Lisa Arquette, associate director at the FDIC, told attendees that a key difference had emerged between the failures that precipitated the Great Recession more than a decade ago and the anxiety-fueled run on deposits that marks the current crisis.
“Things have changed in communications,” Arquette said. “Social media can really cause rapid deposit outflows unlike anything we’ve seen previously.”
Koko Ives, manager of Bank Secrecy Act and anti-money laundering compliance at the U.S. Federal Reserve, discussed what regulators expect of banks and other financial institutions that still maintain relationships with virtual asset service platforms following the demise of a handful of prominent cryptocurrency companies last year.
“This is not “Chokepoint 2.0,” as some articles have indicated,” Ives said, referring to the controversial, four-year federal crackdown on pawnshops, gun dealers and other purportedly high-risk clients that began in 2013. “I would just say it is incumbent upon any bank to fully understand the risks involved, that it’s permissible activity, that you have the technology [and] know-how to make essential decisions.”
Arquette then warned of the consequences potentially lying in wait for financial institutions that outsource their due-diligence processes and other compliance-related functions to third parties without first ensuring they are up to the task.
Help is on the way, however, as the FDIC and other federal banking regulators will soon publish updated guidance on how financial institutions should go about managing the risks associated with external vendors, Arquette said.
Jay Song, director of the Financial Crimes Enforcement Network’s Office of Compliance, said that updating the monetary thresholds that trigger currency transaction reports and, in some cases, suspicious activity reports, represents a top priority at the bureau, second only to building a federal database of beneficial owners.
During the second panel Tuesday, Him Das, FinCEN’s acting director, discussed his bureau’s issuance of alerts and advisories to draw attention to Russia’s sanctions evasion and misuse of commercial real-estate transactions since February 2022, when the Kremlin-ordered, full-scale invasion of Ukraine commenced.
Suspicious activity reports prompted by those alerts and advisories led directly to the designation of 22 individuals and entities suspected of helping Russia and Belarus evade sanctions to procure military and industrial hardware, Das said.
“We’ve actually taken action on the bulk of those SARs,” said Das. “I think the categorical answer to the question of whether reporting that we’ve received is effective and useful … is: ‘Yes, absolutely.’ ”
Concerns over pending revisions to the customer due-diligence rule after the ownership database goes online surfaced in more than one panel during the conference.
Sarah Runge, regulatory director for Meta Payments, predicted Tuesday that financial institutions will become responsible for flagging information in the database that conflicts with their own records, and for investigating such discrepancies.
If requirements to update and verify beneficial ownership information prove overly burdensome, panelists said, banks and other financial institutions may opt to avoid accessing the database.
“In 10 years, will we be using the registry or ignoring it,” said James Sayko, a financial crimes leader at Wells Fargo.
Financial institutions should not expect guidance on to what anti-financial crime priorities they should assign a lower priority when implementing FinCEN’s chosen priorities, Craig Timm, U.S. head of AML at ACAMS, said Tuesday afternoon.
“Nobody says, ‘You can stop doing this,’ ” he said.
To avoid layering new on top of existing responsibilities and consequently stretching their resources thin, they should consider whether transactions that historically have not drawn much attention from law enforcement truly warrant a SAR.
On Wednesday, Marcy Forman, a senior anti-financial crime compliance officer at Citigroup, advised attendees to refrain from using the information-sharing provisions of Patriot Act 314(b) solely for know-your-customer purposes.
“It’s a good source of leads,” Foreman said. “On the other hand, I would also suggest that 314b should not be used, or misused, as a KYC tool, because that kind of dilutes the legitimacy … and [is] not necessarily investigative in nature.”
Cryptocurrency exchanges and other VASPs frequently fail to make full use of know-your-customer information, Andrea Gacki, director of Treasury’s Office of Foreign Assets Control, told attendees of the conference’s penultimate panel on Thursday.
“Maybe there will be information on the client side, really good KYC information spotlighting where a customer is located,” Gacki said. “But that’s not brought over to the sanctions screening element, leading to violations based on people engaging in transactions, whether it’s in Crimea or Iran or the like—we’ve seen that especially in our virtual-currency enforcement actions.”
During the panel, Justine Walker, head of global sanctions and risk at ACAMS, and Giles Thomson, director of Britain’s Office of Financial Sanctions Implementation, discussed variances between the U.S. and U.K. commercial and financial embargoes of Russia, and whether the two agencies can work with regulators to clarify sanctions-screening expectations.
“I do think there is an opportunity to align there—the U.S. and the U.K. could lead the way on this,” Walker said. “Could we potentially be seeing some greater harmonization on these types of areas?”
“We’ll do it,” Thomson answered.
Sanctions screening ran throughout the conference.
Markiyan Kliuchkovskyi, legal advisor to Ukrainian President Volodymyr Zelenskyy, said in a keynote address Wednesday morning that he sees the effect of Western sanctions firsthand, as fewer and fewer Russian missiles and suicide drones fall on Kyiv.
“I know they have made your work more difficult,” he said against a backdrop photo of the blacked-out, bomb-damaged city. “But remember, it is the war that’s making things difficult.”
James O’Brien, head of the U.S. State Department’s Office of Sanctions Coordination, said Russia is creating “seemingly innocent” pools of funds that the country can use as needed to, for example, acquire Western-banned military components and other goods.
“We’re looking for evidence of the channels Russia is using,” O’Brien said. “There are only so many channels and so many middlemen—it’s the channels that matter the most.”
And that’s a wrap.
Safe travels home, and see you in Dublin!
Contact Benjamin Hardy at email@example.com and Fred Williams at firstname.lastname@example.org
|Topics :||Anti-money laundering , Counterterrorist Financing , Sanctions , Cryptocurrencies|
|Source:||U.S.: FinCEN , U.S.: FDIC , U.S.: Department of State , United Kingdom , Ukraine , U.S.: OFAC , U.S.: Federal Reserve Board , U.S.: OCC|
|Document Date:||May 12, 2023|