Financial regulatory bodies, including the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), Financial Crimes Enforcement Network (FinCEN), and Financial Action Task Force (FATF), are cracking down on companies with lax anti-money laundering policies. The first half of 2019 has seen increased efforts by these agencies to tighten the reins on companies failing to keep federally mandated anti-money laundering (AML) policies up to standard.
Instead of focusing on simply penalizing specific transactions, these regulatory agencies are attempting to tackle what are perceived to be larger, systematic issues with AML compliance programs in general. Companies can now expect to not only be evaluated regarding the mere existence of anti-money laundering policies, but also regarding the maintenance, improvement, quality, and efficacy of these protocols when they’re put into action.
Simply having AML compliance programs, regardless of how comprehensive they may seem in writing, won’t be enough by themselves to fulfill federally mandated standards. Rather, companies must continue to improve their policies and regularly reevaluate risk, accounting for factors that can heighten the risk of money laundering, such as certain types of transactions, geographic jurisdictions, and third-parties involved.
The quality and reliability of the information feeding systems in place for monitoring and reporting suspicious activity is also an important factor taken into consideration when evaluating companies’ AML compliance performance. Recently, a number of major financial services companies participating in the U.S. market — including Morgan Stanley, MoneyGram International, Capital One, UBS, and Mashreqbank—have had hefty fines levied against them for various deficiencies in their AML and Bank Secrecy Act (BSA) compliance programs.
Besides disciplining companies that deal in traditional fiat currency, regulatory agencies are also turning their attentions to facilitators of virtual currency exchanges. A report released on August 13th by cryptocurrency intelligence firm CipherTrace stated that approximately $4.26 billion in cryptocurrency have been lost due to thefts, scams, and fraud in 2019 so far. These illicit funds must be laundered in order to be useful, and this in part has led U.S. and international agencies alike to strengthen the oversight of these virtual assets.
In fact, a bipartisan bill nicknamed the ILLICIT CASH Act was introduced in June of this year by a group of members of the Committee on Banking, Housing , and Urban Affairs. In a public press release, the senators stated that the legislation aims to update antiquated AML laws and account for the more sophisticated technologies and methods being used by criminals today. Among other things, the bill would require foreign banks to cooperate with U.S. money laundering investigations, establish federally mandated reporting requirements regarding corporate ownership, and update regulatory policies to specifically include forms of digital currency.
If you have any questions regarding anti-money laundering compliance and reporting, please contact James Heavey.