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Review of Anti-Money Laundering and Sanctions Policy and Enforcement

TABLE OF CONTENTS:

Executive Summary

Developments and Trends in Policy and Enforcement

  • US Department of the Treasury
  • The Office of Foreign Assets Control
  • Treasury's Financial Crimes Enforcement Network
  • Department of Justice
  • Office of the Comptroller of the Currency
  • Federal Reserve Board
  • Federal Deposit Insurance Corporation
  • Securities and Exchange Commission
  • Financial Industry Regulatory Authority
  • Commodity Futures Trading Commission
  • New York State Department of Financial Services

Proposed Legislative Changes to BSA/AML Policy

 

Executive Summary

This anti-money laundering and sanctions review provides an overview and insights with respect to material developments in the United States regarding Bank Secrecy Act ("BSA")/anti-money laundering ("AML") and economic sanctions policy and enforcement in 2018. Going forward, White & Case expects to publish a similar review on a semi-annual basis to provide financial institutions with regular updates and insights. Future editions will also address material developments outside of the United States.

This review discusses key developments and trends in BSA/AML and economic sanctions policy and enforcement on an agency-by-agency basis, including rule implementations, enforcement actions and agency statements suggesting future priorities and actions. In addition, this review discusses potential legislative changes to BSA/AML and economic sanctions policy under consideration by US lawmakers.

In reviewing developments throughout 2018, several trends are apparent:

Growing convergence between OFAC and FinCEN actions:

  • Throughout the year, there was an apparent synchronization between actions by the US Department of the Treasury's ("Treasury's") Office of Foreign Assets Control ("OFAC") and Treasury's Financial Crimes Enforcement Network ("FinCEN"). The coordination between agencies also suggests that greater coordination is expected among AML and sanctions compliance teams at financial institutions to ensure that assets are blocked and transactions rejected in compliance with sanctions and that suspicious activity reports ("SARs") of possible sanctions evasion are submitted to FinCEN.

Enforcement and personal liability:

  • Federal regulators continue to bring a large number of enforcement actions and assess substantial monetary penalties as the Trump administration pursues its law enforcement and countering the financing of terrorism ("CFT") agenda. Regulators are also focused on individual accountability for violations, as demonstrated through the many actions pursued against individuals discussed below and emphasized in remarks delivered by Deputy Attorney General Rod Rosenstein in May 2018. Regulators and the Department of Justice ("DOJ") have not been pursuing individual executives and compliance officers for simple failures of compliance, but rather for egregious conduct, including deliberate attempts to circumvent or sideline compliance controls or to actively hide from or misrepresent information to regulators.

Agency coordination:

  • In his May 2018 remarks, Deputy Attorney General Rosenstein also announced a new policy to encourage coordination among the DOJ and other government enforcement agencies when imposing multiple penalties for the same conduct, with the goal of enhancing coordination while avoiding duplicative penalties, or "piling on." The various agencies have made a point of emphasizing their coordination and consideration of penalties imposed by other agencies in several enforcement actions this year. The extent to which federal agencies and state actors, such as the New York State Department of Financial Services ("DFS"), will succeed in coordinating remains to be seen. In addition, a working group of FinCEN and federal banking agencies released two joint statements in 2018 that respectively encourage industry innovation in BSA/AML compliance and address resource sharing among smaller institutions. This working group continues to meet regularly, and FinCEN Director Kenneth Blanco has identified the group's priorities as including: (i) industry innovation; (ii) reviewing the risk-based approach to the examination process; (iii) reviewing agencies' approach to BSA/AML supervision and enforcement; (iv) exploring concrete ways to increase the value of BSA/AML data across stakeholders; and (v) streamlining SAR reporting while retaining value to law enforcement.

Digital currencies:

  • Federal regulators have cited BSA/AML compliance as an area of continued focus and in many cases have specifically mentioned digital currencies and other developing financial technologies as a key risk to which they will be paying attention going forward. In November 2018, OFAC took action against two Iran-based individuals for helping to exchange bitcoin ransom payments on behalf of Iranian cyber actors and, in doing so, for the first time publicly attributed digital currency addresses to designated individuals.

Legislative developments:

  • Bipartisan support appears to exist in both the Senate and House to "modernize" the BSA and otherwise make BSA/AML compliance more effective and efficient, although no such legislation was approved by Congress during the 115th Congress. However, certain bills proposed during the 115th Congress are expected to serve as a starting point for legislative proposals in the 116th Congress, which convened in early 2019.

 

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