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In terms of anti-financial crime developments, 2021 will be a tough act to follow. The past 12 months have seen the most prolific output of new rules and proposals against money laundering and terrorist financing since 2001, when the Patriot Act launched the modern era of compliance.

What lies in store for financial services industry professionals in 2022?

Senior regulators, law enforcement agents, attorneys and consultants shared their predictions for the year ahead with ACAMS moneylaundering.com reporters Daniel Bethencourt, Gabriel Vedrenne, Koos Couvée and Valentina Pasquali.

An edited transcript of their conversations follows.

On AML reform and supervision:

Grovetta Gardineer, senior deputy comptroller for bank supervision policy, Office of the Comptroller of the Currency: We expect the implementation of the provisions of the AML Act to continue to be a key priority for the agency over the coming year. As rulemaking proposals currently under consideration progress, we expect that changes to our BSA/AML supervisory policies, processes and procedures may be necessary and this will ultimately affect our training programs as our examiners prepare to evaluate compliance with new and revised rules and regulations.

In addition, our supervised banks will also be facing the challenge of adapting policies, procedures, and processes as well as systems to achieve compliance with new and revised rules and regulations and train staff appropriately. Our engagement with our banks through outreach and guidance will be important to facilitate and support them in this transition to the revised BSA/AML regime established by the AML Act.

Jim Lee, chief, IRS Criminal Investigation: The Corporate Transparency Act is the first significant update to U.S. anti-money laundering laws in 20 years, and anytime legislation allows law enforcement direct access to lawful information that assists in our investigations, it is welcome.

The new requirements will improve two areas which specifically pertain to IRS and CI: assisting law enforcement with financial investigations and facilitating tax compliance. Our FinCEN liaison, along with the other FinCEN law-enforcement liaisons, are engaged with the bureau to assist in the eventual implementation of portions of the CTA, particularly the setup of the beneficial ownership database.

Carolin Gardner, head of AML, European Banking Authority: Arguably the biggest change is one that has not yet taken effect: the publication of the final version of the European Commission’s AML package, which is very ambitious and will completely reshape AML/CFT in the EU. It is still being negotiated and will only start to take effect from 2023.

As for 2022, we have put in place a very comprehensive regulatory framework and we have started to see this make a real difference, but we’re not there yet, so our focus this year will be very much on implementation, and supporting the relevant national authorities for all sectors. We will also continue to focus on strengthening cooperation—among supervisors and between supervisors and FIUs—in the light of our recent findings that cooperation is often below expectation.

Vincent Heintz, regional head of financial crime compliance for Europe and the Americas, Standard Chartered Bank: I think the AML Act is going to move the compliance space to a much stronger footing. Sarbanes-Oxley called for promulgation of standards about what auditors of publicly traded companies needed to do, and I’m hopeful that FinCEN and federal banking regulators will take a cue from that. So one future development is the emergence of a consistent set of standards from the AMLA of 2020.

The AMLA voices support for public-private partnerships, which is a very positive trend in the industry. We’re seeing Singapore, the U.K. and other jurisdictions around the world employing those frameworks. We’re hopeful that 2022 moves the public-private exercise beyond a badge of good corporate citizenship into a core tool of compliance, where demonstrable impacts in terms of law enforcement become as important to regulators as our quality-control tests.

On complex financial crimes, pandemic-related fraud and MSBs:

Burkhard Muhl, head of the European Economic and Financial Crime Center, Europol: We see that national recovery schemes are already being attacked by fraudsters. We hope that the EU recovery funds will be safe but next year we will see how serious the fraud threat is in practice. We know that organized crime will try to get their share of it, but this is something we have been preparing for, and if it happens, hopefully we are ready to support the member states as best as possible.

Nick Sharp, deputy director for economic crime, HM Revenue & Customs, United Kingdom: How people go about defrauding the system will continue to get more complex and sophisticated. We used to be able to quite easily understand how people’s finances worked. But with the growth of what you might call the alternative economy—influencers, crowdfunding, the gig economy, increased investment in crypto assets and so on—there are now many new ways of hiding wealth, evading tax and laundering the proceeds of crime that make it harder to separate legitimate from illegitimate income.

Crypto assets used to be the end of the laundering chain, but now it’s moving more towards placement and layering. There are advantages to this: it’s digital so it leaves an audit trail, but it seems like developments are moving at a much faster pace than I’ve ever known in the financial world, and we’ve got to keep up with it.

In 2022 I don’t think you’re going to see lots of change in the MSB sector from a supervisory perspective, but you will see increasing law enforcement and supervisory outcomes in the next year as our strategy of the last few years is bearing fruit. We have investigations where we have people being arrested and prosecuted and fines being levied and businesses being shut down. There’s definitely going to be increased momentum as we go forward and that’s all about trying to drive out not only complicit—but negligent—businesses that criminals can exploit.

On innovation:

Grovetta Gardineer, senior deputy comptroller for bank supervision policy, U.S. Office of the Comptroller of the Currency: It is likely that innovation in the financial sector will continue, producing increasingly sophisticated platforms supporting regulatory technology applications, and payment products and services responsive to bank customer needs for better access to their accounts and overall convenience. It is also likely that cryptocurrencies and assets will continue to grow and virtual asset service providers will continue to seek partnerships with banks. Training and preparing our examiners with the knowledge, skills and expertise to meet the risk challenges associated with these developments is another key priority.

Paul Wilwertz, secretary general, Commission de Surveillance du Secteur Financier, Luxembourg: 2022 will be a year of enhanced exchanges between national authorities in order to ensure, among other things, consistency in AML/CFT supervision from nation to nation. The analysis of AML/CFT risks present in Luxembourg will also be on the agenda of these exchanges, as the relevant authorities are currently working on several studies dedicated to specific AML/CFT issues and international financial sanctions.

Using innovation to advance the fight against criminal threats and mitigate growing, complex AML/CFT risks in Europe and throughout the world remains a major objective for the CSSF in 2022.

The CSSF will especially monitor compliance with sanctions, with an emphasis on the improvement of specific, thorough controls to this end. As far as the banking sector is concerned, the controls relate to the adequate management of risks, in particular terrorist financing and proliferation-related risks for banks that offer correspondent services and trade finance.

Stephan Niermann, director of group compliance and licensing, N26: The push for digitalization will continue and this means firms will increasingly adopt machine-learning solutions that apply throughout the customer lifecycle. Also, with the whole debate around the traceability of decision-making in machine-learning models, I would hope that we are entering into more-and-more constructive dialogue with national authorities across Europe to build an understanding of these models, acknowledge the deficiencies of rules-based, traditional transaction-monitoring systems and embrace new ways of fighting financial crime.

At the same time the new EU framework and prospect of an EU supervisory authority will put pressure on AML regulators to define their footprint for the future.

On AML and cryptocurrency:

Deborah Connor, chief, Money Laundering and Asset Recovery Section, U.S. Justice Department: We will continue to focus on the investigation and prosecution of complex corporate crime, including investigation and prosecution of corporate criminal actors, illicit use of cryptocurrency, and cryptocurrency financial institutions that violate the law.

In this vein, we expect to see increased focus on cryptocurrency enforcements with the launching of the National Cryptocurrency Enforcement Team—building upon the work of MLARS’s digital currency initiative and that of our colleagues in the Computer Crime and Intellectual Property Section—and the selection of a director to lead this team.

Because crimes involving cryptocurrency can take many forms, the NCET will not only pursue its own cases, but also support existing and future cases brought by the Criminal Division and in the U.S. attorneys’ offices across the country by drawing on the department’s cyber- and money-laundering expertise to strengthen our capacity to dismantle the financial entities that enable criminal actors to abuse cryptocurrency platforms.

Iggy Azad, director, global intelligence, Coinbase: The increase in cryptocurrency adoption means other regulated sectors will have to get a much better grasp of it as a financial product. How does it impact a range of businesses, including tax advisories, accountancies, real estate agencies, insolvency and estate planning? What if they get paid in cryptocurrency? How will they check the source of wealth or source of funds? Cryptocurrency is becoming much more widely adopted and the compliance industry needs to think about how they involve it in their day-to-day business to ensure they’re not caught on the backfoot.

We know the cryptocurrency market is going to grow, and our challenge will be able to continue to function effectively, get the right hires in place and continue to train staff. This will probably lead to a lot of competition for talent in the crypto-compliance space but also within more traditional finance sectors, as they create their own cryptocurrency offerings.
On the evolving regulatory framework for crypto:

One of the main things to look out for in 2022 is more regulatory clarity for cryptocurrency industry on securities-related issues and tax rules. There needs to be a lot more communication, not only between different exchanges but also between regulators and the industry to produce regulations that are acceptable to all sides. If both sides end up taking a more entrenched position, that will only lead to bad regulation.

On the digitalization of financial crime:

Jim Lee, chief, IRS Criminal Investigation: Financial crimes are increasingly international in scope because they involve cyber components. So, not only do we need to say abreast of the latest criminal trends and schemes, but we also need to continue to foster relationships with our foreign counterparts to combat crimes on a global level. The J5 [Joint Chiefs of Global Tax Enforcement] allows us to cut through some of that red tape, but anytime there is international collaboration, the investigations have an added layer of complexity.

Thomas de Ricolfis, director, Anti-Financial Crimes Sub-directorate, France: In terms of priorities, in addition to the traditional topics such as money laundering, corruption and tax fraud, we will pay more attention to the digitalization of financial crime. Thanks to the development of digital tools and the digitalization of finance, criminal groups now favor fully online banks. Because there is no longer any physical contact, creating an account is quick and less risky for them.

And then of course there are cryptocurrencies. The digitization of criminal assets has already begun, but it could cross a new threshold with NFTs [nonfungible tokens]. We’re looking into it, especially since prices are rising and companies are starting to get into NFTs. We are therefore working on the subject, and are starting to alert our investigative teams to warn them that if the term “NFT” appears during raids or in seized assets, they must pay attention to it and pass on the information. We have not yet had any cases involving NFTs, but our job is to anticipate, to define which vectors are the most promising for criminals, and NFTs are definitely on the list.