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If years were disgruntled spouses, 2022 threw everything at us but the kitchen sink, starting with political turmoil in Britain, a criminal referral against a former U.S. president, uprisings in Iran, a standoff between superpowers near Taiwan and a decoupling of the global economy.

The year began with Omicron and inflation; witnessed the revocation of U.S. constitutional protections for abortion, Europe’s worst drought in 500 years and Britain’s longest-serving monarch laid to rest; and ended with a World Cup, the world’s population passing 8 billion and nuclear scientists in California announcing a breakthrough that could one day power the planet.

2022 also held plenty in store for financial institutions, as lawmakers, regulators and officials on both sides of the Atlantic moved quickly to address emerging patterns of illicit finance with new rules while also imposing an unprecedented economic embargo in response to what undoubtedly ranked as the year’s most important, most tragic event: Russia’s full-scale invasion of Ukraine.

Old game, new rules

U.S. anti-money laundering enforcement began in earnest in January when BLV, a small broker-dealer in Pennsylvania, drew a fine from the Financial Industry Regulatory Authority for handling millions of suspiciously obtained dollars from investors in Brazil with little to no scrutiny. More

Sanctions evasion ranked high on the list of priorities for companies regulated by FINRA, said Jason Foye, senior director of the agency’s AML investigations unit.

“We have also focused on several other threats,” said Foye, who highlighted FINRA’s warning in November over the suspected proliferation of pump-and-dump schemes involving initial public offerings for certain small-capitalization issuers listed on U.S. stock exchanges.

The Treasury Department’s Financial Crimes Enforcement Network launched a pilot program in January for financial institutions to share information from suspicious activity reports, or SARs, with their branches, subsidiaries, affiliates and parent companies overseas. More

FinCEN also disclosed plans that month to formally require that financial institutions gauge their exposure to financial crime and build “effective and reasonably designed” AML programs. More

The bureau then outlined how criminals could use the high-end art market for money laundering purposes and singled out the financial crime-related risks that non-fungible tokens and other new technologies present. More

In February, federal prosecutors in Washington, D.C., accused a husband and wife of laundering billions of dollars of bitcoins that hackers allegedly stole six years ago from Bitfinex, a British Virgin Islands-registered exchange. More

“Well over half of the cases I’ve taken in 2022 involved some sort of crypto angle either on the front end, with a fraudulent scheme related to crypto, or on the back end, where criminals are laundering proceeds through cryptocurrency,” said David Pitluck, head of business and securities fraud investigations for the U.S. Attorney’s Office for the Eastern District of New York.

In the weeks before Russia’s attempted conquest of Ukraine commenced, U.S. officials joined their British and EU counterparts in significantly expanding their ability to impose sanctions on the Kremlin, President Vladimir Putin’s cronies and key sectors of the Russian economy. More, More and More

By the time the first Russian tanks, trucks and infantry carriers rolled into Ukrainian territory from three directions in the early hours of Feb. 24, the White House had already prepared an initial round of sanctions to impose “catastrophic” consequences on the Kremlin. More

Hours after the war’s opening salvos landed in Kharkiv and other Ukrainian cities, the Office of Foreign Assets Control, or OFAC, gave financial institutions 30 days to close any correspondent or payable-through accounts held by the Kremlin-controlled Sberbank, Russia’s largest lender, and ordered “full blocking” of transactions tied to VTB, Russia’s second-largest lender. More

A week later, the EU locked VTB and six other Russian banks out of the Society for Worldwide Financial Telecommunication, or Swift.

The challenge of identifying and seizing assets from blacklisted Russian oligarchs further exposed widespread shortcomings vis-a-vis beneficial ownership and criminal exploitation of limited liability companies and other legal entities, said John Tobon, special agent in charge for Homeland Security Investigations in Honolulu.

“They also highlighted some of the legislative challenges that those types of investigations pose,” Tobon told ACAMS moneylaundering.com. “For instance, we saw this in the U.K. with unexplained wealth orders.”

FinCEN unveiled plans in March to share tips on illicit transactions linked to Russia with the FIUs of Canada, the U.K. and seven other nations. More

FinCEN also disclosed plans to raise its headcount from 285 full-time employees to 420, and task more than 100 of its staff with implementing the AML Act and Corporate Transparency Act, legislation which requires the bureau to construct a database of beneficial owners and reward whistleblowers. More

The bureau finalized the first of three rules associated with the database six months later. More

FinCEN assessed a $140 million penalty against Texas-based USAA Federal Savings Bank in March for “willfully failing” to submit accurate, timely reports on suspicious transactions. More

The Office of the Comptroller of the Currency, which oversees more than 1,000 national banks, finalized a rule in March to align the agency’s SAR exemption framework with that of FinCEN’s and promoted the use of novel strategies for flagging suspicious transactions. More

Six months later, the OCC fined Michigan-headquartered Sterling Bank and Trust $6 million in response to the lender’s failure to file SARs by deadline and comply with AML rules. More

President Joe Biden’s administration warned in March that lackluster, uneven implementation of global AML standards exposes the international financial system to criminality. The White House also echoed concerns that the rise of decentralized finance, peer-to-peer payment systems and obscure, inadequately regulated blockchain technology did the same. More

A senior U.S. prosecutor then unveiled a proposal that requires chief compliance officers and chief executive officers to formally attest to the soundness of any plans by their employers to address AML lapses and other breaches as part of any legal settlement they secure. More

The Justice Department later renewed, or at least reiterated, a policy first outlined in a memorandum seven years ago that companies must fully cooperate at the onset of an investigation and name any employees involved in misconduct to mitigate the consequences of their infractions. More

“The department is placing a new and enhanced premium on self-disclosure,” Associate Deputy Attorney General Marshall Miller told attendees of the American Bankers Association and American Bar Association’s conference in Washington, D.C., on Dec. 6. “We want companies to step up and own up.”

April brought FinCEN’s first assessment of a penalty against a company for failing to meet the requirements of a geographic targeting order, with the bureau fining A&S World Trading Incorporated, a perfume shop in Los Angeles, $275,000 for not flagging $2.3 million of transactions in 2014 and 2015 pursuant to a GTO covering the L.A. Fashion District. More

“It’s significant in part because of the U.S. real estate market,” said AnnaLou Tirol, a former deputy director at FinCEN now working as a partner at the O’Melveny law firm in Washington, D.C.

Although the penalty against A&S does not trace back to a longstanding GTO governing all-cash purchases of U.S. property, financial institutions and other interested parties should still view the action in the context of FinCEN’s development of a permanent, GTO-like reporting requirement for the real estate industry, Tirol said.

The Financial Action Task Force, or FATF, outlined plans in April to assess nations with relatively higher exposures to money laundering, terrorist financing and other financial crimes first in future rounds of evaluations. More

In May, the Securities and Exchange Commission fined Wells Fargo’s trading branch in St. Louis $7 million for “willfully” violating AML rules by not reporting suspicious activity in a timely manner on at least 50 occasions. More

Homeland Security Investigations and ACAMS reported that month that individuals suspected of involvement in organized retail crime often sell their stolen goods on poorly monitored online marketplaces, transfer the proceeds into banks, then wire them to funnel accounts across state borders. More

A senior compliance officer for one of the largest banks in the U.S. said that fraud ranked as his institution’s primary concern in 2022.

“It’s just exploded,” the compliance officer said. “I think that’s what everybody’s grappling with—we’re flooded with fraud cases, and that’s what I’ve heard from other banks as well.”

New York’s Department of Financial Services issued the state’s first penalty against a virtual asset service provider in August, fining the cryptocurrency branch of Robinhood Markets $30 million for “significant violations” of AML and cybersecurity rules. More

Three months after blacklisting cryptocurrency mixer Blender.io, OFAC designated a second mixer, Tornado Cash, in August for laundering more than $7 billion of Ethereum-denominated proceeds since beginning operations in 2019. More

“The big issue was that for the first time, we saw an open-source technology being designated,” said Steven Christie, senior vice president for compliance at Binance in San Francisco.

The Federal Reserve warned financial technology-based firms, or fintechs, in August that any chance they may have of securing a master account from the regulator depends on the extent to which they comply with the same AML and other standards that already apply to banks. More

FinCEN published an advanced notice of proposed rulemaking in June that outlined the bureau’s intention to issue “no-action” letters that would protect banks, money transmitters and other financial institutions from enforcement if they unintentionally breach AML rules while testing new strategies for compliance.

The plan received mixed reviews from the financial services industry. More

Conservative political strategist Steve Bannon surrendered to the Manhattan District Attorney’s Office in September on charges of stealing and laundering hundreds of thousands of dollars from his crowdfunding website, WeBuildTheWall. Former President Donald Trump pardoned Bannon of his federal conviction for the same misconduct in January 2021. More and More

The Treasury Department refused a request from Rep. James Comer (R-KY), ranking member of the House Oversight Committee, in September to provide lawmakers with any SARs filed on Hunter Biden, four months after rejecting a similar request for SARs from Rep. Maxine Waters (D-CA), chair of the House Financial Services Committee. More

In October, Bittrex, a cryptocurrency platform headquartered near Seattle, triggered $29 million in penalties from FinCEN for willfully breaching U.S. sanctions and AML requirements. More

OFAC assured U.S. financial institutions in October that they could stay onside of a Western price cap on Russian oil even without having direct insight into the parties involved in energy-related transactions but warned in November that they will still play a role in enforcing the measure, which took effect Dec. 5. More and More

November also brought the collapse of FTX, the world’s second-largest cryptocurrency exchange, raising questions over whether banks and other financial institutions conducted a sufficient level of due diligence when doing business with the platform. More

The Bahamas then extradited FTX founder and former chief executive Samuel Bankman-Fried to New York, where federal prosecutors have charged him with fraud and money laundering. More

Investigations into FTX rival Binance continued apace throughout the year, with federal prosecutors reportedly divided as to whether they had obtained sufficient evidence to pursue an indictment related to alleged AML violations.

Kraken, the second-largest exchange in the United States, avoided a large penalty from OFAC in November after voluntarily informing the agency that it handled the equivalent of $1.7 million for parties in Iran from 2015 to 2019. More

One of the more important developments for financial institutions in 2022 may be what did not happen: A systemic banking crisis sparked by a general plunge in the values of cryptocurrencies and the failures of major exchanges.

“Despite contagion across cryptocurrencies and several crypto platforms, the federally regulated banking system has, for the most part, been largely unaffected,” Acting Comptroller of the Currency Michael Hsu told the Senate Banking Committee on Nov. 15.

Canadian officials published a five-year plan in May that would see AML rules extended to unregulated mortgage lenders and other companies, and more funds allocated to AML supervision, corporate transparency and investigations into suspected financial crimes. More

After 133 days of hearings, the Cullen Commission, a panel of attorneys and judges assigned to investigate illicit finance in British Columbia, concluded in June that failures in oversight and enforcement allowed tens of billions of dollars of suspicious origin to enter the province’s gaming, property and banking sectors extend throughout Canada. More

Danske Bank pleaded guilty in December to conspiring to defraud U.S. banks, pledged to implement AML upgrades and agreed to pay more than $2 billion in penalties, forfeitures and disgorgements as part of a legal settlement with American and Danish authorities. More

FinCEN ended the year by issuing the “access rule,” the second of three rulemakings that will underpin the bureau’s impending database of beneficial owners. More and More

Several banks exited longstanding enforcement actions in 2022, including Citigroup, which fulfilled the terms of a Bank Secrecy Act-related consent order that the OCC imposed in 2012, and HSBC, which the Federal Reserve tagged with a consent order the same year.

“One thing that’s interesting is seeing movement again from U.S. regulators in terms of lifting some of the older, more mature enforcement actions,” said Daniel Tannebaum, global anti-financial crime leader at the Oliver Wyman consulting firm in New York. “I think that helps create something of a path for others to follow.”

Third-party risk management for AML purposes also emerged as an area of heightened regulatory focus in 2022, as shown by the OCC’s action against Virginia-based Blue Ridge Bank in August. More

“It’s now quite clear that even if a third party is involved—let’s say a fintech—with customers, the bank is ultimately going to have to ensure that there are rigorous, robust controls in place, and that they mitigate risks of illicit finance and money laundering,” said Gregg Rozansky, senior vice president at the Bank Policy Institute.

The U.S. Senate closed 2022 by passing legislation to raise minimum payouts to whistleblowers who provide FinCEN with original information on AML violations and financial crimes and add $30 million to the bureau’s current operating budget. More

Across the pond

The U.K. National Crime Agency, or NCA, began the year with a victory after the Westminster Magistrates’ Court in London approved the seizure of £5.6 million from accounts linked to a prominent Azeri lawmaker who allegedly moved the funds into Britain via the “Azerbaijani Laundromat.” More

In February, with expectations that Putin would order his troops to invade the whole of Ukraine approaching near certainty, the U.K. pre-emptively strengthened sanctions against Russia by authorizing the government to blacklist Kremlin-linked oligarchs for the first time. More

Britain subsequently joined the EU, U.S. and other Western allies in imposing an unprecedented financial, commercial and energy embargo on Russia after the invasion commenced. More

For U.K. financial institutions, moves by blacklisted Russian oligarchs to transfer their assets to family members or other connected parties complicated compliance with the “completely unprecedented” restrictions, Susannah Cogman, a partner with Herbert Smith Freehills in London, told moneylaundering.com.

The restrictions included designations of several people with stakes in many commercially important companies, Cogman said. “Then there was a lot of divestment, at which point it becomes difficult to establish whether [the firms] are still controlled by the designated person.”

The war in Ukraine deepened concerns over Britain’s role as a destination for both licit and illicit funds from Russia and other kleptocracies.

In March, the U.K Parliament hastily passed the Economic Crime (Transparency and Enforcement) Act, which mandated the creation of a public database of individuals who own real estate in Britain through offshore legal entities and eased the government’s ability to obtain unexplained wealth orders. More

The legislation also empowered the Office of Financial Sanctions Implementation, or OFSI, to issue civil monetary penalties on a “strict liability” basis, which freed the agency from having to prove that firms or individuals knew or had reasonable cause to suspect that a particular transaction or activity violated sanctions to penalize them. More

“It has made firms on the whole rather more risk-averse,” said Cogman. “In the Russian situation in particular the facts are often so murky that even if you have quite a high degree of confidence of not having committed any breach, you’re still stuck with the fact that if you did get it wrong, you’re now technically liable.”

OFSI chief Giles Thomson disclosed in June that the agency had launched investigations into several companies suspected of violating sanctions against Russia and begun a hiring campaign to meet the growing demand for guidance, licenses and enforcement. More

A criminal trial against eight individuals suspected of involvement in a scheme to launder £266 million through a now-defunct wholesale jeweler based in Bradford, England, began in nearby Leeds in May. More

The following month, the Financial Conduct Authority, or FCA, fined the London-based subsidiary of Ghana International Bank £5.8 million for failing to screen billions of pounds of correspondent payments for signs of financial crime from 2012 to 2016. More

In July, HM Revenue & Customs warned hundreds of British customers of Euro Pacific Bank, a Puerto Rico-based lender shuttered by local regulators that month amid a global investigation into tax evasion and money laundering, to come forward with information about their finances to avoid triggering a criminal investigation. More

News also emerged in July that the NCA had opened an investigation into blacklisted Russian oligarch Petr Aven and his associate for allegedly dodging sanctions amid a sharp rise in suspicious activity reports filed by U.K. firms in the first months of the Ukraine war. More

By that point, the total volume of SARs filed by banks and other businesses in Britain had gone “through the roof.” More

The NCA also raised concerns over the potential for “over-the-counter” cryptocurrency brokers to launder millions of pounds for U.K. crime syndicates and warned that blacklisted Russians had ramped up their use of cryptocurrency to move value. More

September also brought updated legislation, the Economic Crime and Corporate Transparency Bill, which aims to newly authorize banks, payment platforms, cryptocurrency exchanges and other companies to exchange data on suspicious clients and transactions.

The bill would also convert Companies House, the agency tasked with overseeing Britain’s database of corporate owners, into a more active gatekeeper of beneficial ownership information. More

Moneylaundering.com reported in October that despite the government’s claim that a new, public database would tackle the problem of anonymous ownership of U.K. property from offshore, a large share of legal entities had undermined that objective by listing a second offshore entity as their beneficial owner. More

The FCA capped off the year with a £108 million penalty against the U.K. branch of Banco Santander for AML failures that allowed hundreds of millions of pounds in suspicious funds to flow through corporate accounts. More

Across the channel

In January, in his first public comments on leaving the Financial Action Task Force after six years, David Lewis, FATF’s former executive secretary, told moneylaundering.com that he had left his post that month out of frustration with the group’s limited success in spurring meaningful improvements to national efforts against financial crime. More

News emerged in February that budget and staffing shortages forced law enforcement agencies in Belgium to abandon dozens of cases against suspected money launderers, art smugglers and other criminals over the past two years. More

FATF censured Russia in March for invading Ukraine, warning that the conflict threatened to destroy the latter country’s banking system and give rise to illicit finance. More

FATF also gray-listed the United Arab Emirates after the jurisdiction scored “low” in four of 11 areas of effectiveness: global cooperation, corporate transparency, pursuit of cases against money launderers, and observance and imposition of sanctions against proliferators of weapons of mass destruction.

As the massive convoy of Russian tanks, trucks and troops stalled outside of Kyiv, sources told moneylaundering.com that European banks were struggling to navigate substantive and technical variances in Western designations and other restrictions against Kremlin-friendly oligarchs. More

National officials told the European Parliament in March that inadequate oversight, uneven enforcement and enduring gaps in the EU’s defenses against financial crime had limited the efficacy of the sanctions. More

By April, several EU nations had tacitly or openly admitted that legal and institutional hurdles had impeded their ability to trace and freeze assets that blacklisted oligarchs controlled through complex corporate structures. More

Monaco took pains that month to advise professionals on how to staunch the flow of illicit funds from flowing into the principality’s multibillion-euro luxury yacht industry. More

Paulis Iljenkovs, head of strategic analysis at Latvia’s financial intelligence unit, or FIU, told moneylaundering.com in August that his government had observed cases in which companies owned by blacklisted Russians managed to secure financial services elsewhere in the EU after the Baltic nation froze their accounts. More

“To agree so swiftly on comprehensive sanctions among 27 member states is a success in and of itself,” Iljenkovs said. “But in terms of uniformity of implementation and enforcement—and therefore effectiveness—the EU could have done better.”

The Latvian FIU warned the prior month that oligarchs had routed some payments to and from Kazakhstan, Uzbekistan and Kyrgyzstan to avoid sanctions, and others to and from jurisdictions that have thus far refused to observe the restrictions, such as Serbia and Turkey.

The United Arab Emirates also emerged this year as a primary jurisdiction for wealthy Russians, blacklisted or otherwise, to invest their money.

“Those countries were previously being associated with circumventing Iranian sanctions and now we’re coming across them in a new way,” said Lora von Ploetz, a Frankfurt-based compliance executive. “Was the industry prepared to handle sanctions of this scale and complexity? Yes, and no—depends on the product.”

In April, the EU prohibited cryptocurrency exchanges and other platforms from providing high-value deposit services to Russian clients as part of a fifth tranche of sanctions against Moscow, before banning the sector from serving Russians altogether six months later. More and More

France, Germany and the Netherlands launched national taskforces in the first weeks of the war to coordinate sanctions against Russia and seize assets from blacklisted parties. Germany then introduced legislation to bolster sanctions enforcement. More

The EU unveiled plans in May to criminalize sanctions evasion across the bloc and more easily prosecute bankers, attorneys and other professionals caught helping blacklisted parties evade commercial and financial embargos. More

A Latvian prosecutor told moneylaundering.com that month that authorities in the Baltic nation seized almost €69 million in 2021 from clients of the now-defunct ABLV Bank, weeks before they charged the lender’s owner, chief executive and several other managers suspected of enabling or ignoring illicit finance. More

French officials meanwhile welcomed the results of an evaluation by FATF, which gave their country the highest marks out of 125 jurisdictions that the group at that point had assessed since 2014. FATF particularly praised France’s efforts to crack down on terrorist financiers, seize assets from criminals and assist foreign investigators. More

Thomas de Ricolfis, director of France’s Anti-Financial Crimes Sub-directorate, said the scores showed that French authorities work together effectively, but warned that investigators must stay on their toes to address the growing use of cryptocurrency and digital payment platforms by organized crime.

“It is a phenomenon that is on the rise, as much for laundering criminal funds as for moving roceeds tied to ransomware, investment fraud, et cetera,” he said. “We find more and more crypto wallets during our searches, which shows that criminals have invested in this field.”

Switzerland’s top court ordered Credit Suisse to pay a record $22 million penalty in June for serving Bulgarian drug traffickers, marking only the second time the country successfully prosecuted a bank for violating AML requirements. More

Swiss authorities then disclosed plans to set up a centralized database of beneficial ownership information and foreshadowed a new bid to fully subject lawyers, consultants, accountants and corporate services providers in the Alpine nation to AML rules next year. More

Michael Manz, a senior official at Switzerland’s State Secretariat for International Financial Matters, told moneylaundering.com that the complexity of Western sanctions against Russia required an “unprecedented” level of cooperation across the Swiss government.

“However, the coordination of the different sanctions regimes at the international level remains a challenge,” said Manz. “Particularly for internationally active financial institutions, which have to comply with different sanctioning regimes simultaneously while at the same time respecting the regulatory requirements of each state.”

The Dutch central bank announced a €3.3 million penalty against Binance, a Cayman Islands-headquartered cryptocurrency exchange, in June for failing to register for AML purposes despite several warnings. More

Deutsche Bank agreed the following month to pay €7 million to settle allegations back home in Germany that the lender failed to report suspicious payments linked to Denmark’s Jyske Bank. BaFin, the country’s primary AML supervisor, simultaneously warned the lender to more thoroughly vet customers. More

German officials unveiled plans in August to create a new umbrella agency to oversee their country’s FIU and federal financial-crime investigations after FATF questioned whether the nation’s technically proficient framework against money laundering and terrorist financing works in practice. More

Birgit Rodolphe, BaFin’s AML director, told moneylaundering.com that the agency had restructured her department this year, hired more staff, and strengthened supervision and enforcement; and intended to “swiftly” implement FATF’s recommendations.

“Our aim is to focus on the non-banking sector in addition to the banking sector, and allow for more in-depth assessments,” Rodolphe said. “With specialized divisions, we are now in an even better position to supervise, for example, the securities sector, as well as insurance companies, payment service providers and crypto businesses.”

In October, German officials unveiled a wide-ranging bill to tackle suspicious wealth and further strengthen sanctions enforcement, including by creating a new federal unit to manage asset freezes and coordinate sanctions nationwide. The government also disclosed plans to introduce unexplained wealth orders next year. More and More

News that the German FIU had accrued yet another backlog of unprocessed suspicious transaction reports and kept that information from FATF during the country’s evaluation led to the resignation of Christoph Schulte, the agency’s director, in December. More

The Netherlands fared better with FATF. In August, the group praised the country’s coordination of AML enforcement and grasp of financial crime-related risks but warned Dutch officials to address remaining gaps in supervision. More

The volume of STRs tripled across Europe from 2021 to 2022, driven largely by a major increase in reporting by virtual asset service providers, moneylaundering.com reported. More

In November, European officials warned about the proliferation of virtual international bank account numbers, or IBANs, amid concerns that organized crime groups and terrorist financiers were using them to move funds. More

“The digitalization in the post-COVID era has given bad actors the possibility of moving money through many jurisdictions with contradictory legal regimes and different supervisory practices,” said Von Ploetz, the Frankfurt-based compliance executive. “With virtual IBANs in particular, you’re facing a situation where your institution is interacting with organizations and institutions you cannot even see.”

In a landmark ruling later that month, the Court of Justice of the European Union found that giving the general public unfettered access to national beneficial-ownership databases amounts to “serious interference” with the EU’s data privacy and protection standards. More

At least eight EU nations responded to the ruling by indefinitely closing their databases to the public. EU lawmakers meanwhile disclosed their intention to safeguard broad access—at least for investigative journalists, advocacy groups and other “interested parties”—in the bloc’s impending Sixth AML Directive. More

France’s Autorite de controle prudential et de resolution, or ACPR, ended the year with a €1.5 million penalty against Credit Agricole in a case that featured the use of artificial intelligence to screen hundreds of millions of transactions. More