This alert was republished by Anti-Corruption Digest on July 30, 2019.
Summary: Bank Secrecy Act/anti-money laundering (BSA/AML) and sanctions matters continue to be a core focus of regulators, law enforcement agencies, policymakers and Congress, and the story of the Obama and Trump Administrations on AML and sanctions is one of general continuity. Policymakers are turning to sanctions with increasing frequency and launching programs that are increasingly complex, and regulatory and enforcement agencies are devoting significant resources and attention to AML. Congress continues to debate BSA reform, while the Treasury Department and federal banking regulators have encouraged financial institutions to use technology to support BSA compliance, in the hope of making the process more effective and efficient.
As Congress, the executive branch and regulators all continue to focus a great deal of attention on AML and sanctions issues, the expectations of financial institutions to prevent financial crime are growing. Sanctions regulations are becoming more numerous, are reaching more deeply into securities markets and are branching into new areas of technology—such as cryptocurrency. Simultaneously, the AML regime’s push toward greater transparency in a number of contexts, from virtual currency regulation to beneficial ownership reform, means that financial institutions will shoulder greater responsibility for knowing their customers and their customers’ activities. Strict distinctions among different categories of financial crime are starting to collapse, as an increasing number of sanctions programs and FinCEN advisories focus on issues such as corruption and misappropriation of assets by politically exposed persons (PEPs).
From the perspective of financial institutions, the need to take an increasingly integrated and coherent approach within individual institutions and the need to consider risk in a global context are paramount. The fact that sanctions programs are increasingly focused on corruption means that financial institutions will need to understand their exposure to PEP clients, particularly in areas characterized by high geopolitical risk, as these individuals are more likely to be exposed to financial sanctions. Financial institutions must keep a close eye on the changing geopolitical landscape and map crisis areas to their client base to ensure their risk management program remains aligned with their risk appetite. All this means that the components of a financial institution’s AML, sanctions, and anti-bribery and corruption compliance efforts must collaborate closely to proactively identify and mitigate risk. It also means that institutions must take a global view, understanding how different components of their organizations interact with each other, where the seams in their controls may be, and where conflicting legal regimes (whether involving a blocking statute, data privacy law or other legal measures) hinder the institution from taking an enterprise-wide approach to managing financial crimes compliance risk.
This report reviews recent trends and developments in the BSA/AML and sanctions regulatory landscape from 2017 to the first half of 2019. It will first describe recent developments in AML and sanctions law and policy, and then will describe recent enforcement actions that shape companies’ obligations with respect to AML and sanctions. We hope it is useful in developing a richer understanding of the current financial crime risk management landscape.
Additional contributors included, Kenneth A. Brady, Michelle Nicole Diamond, Matthew F. Ferraro, Caryn Garvin, Lauren Ige, Kirsten Johansson, Pablo Lafuente, Jessica Lutkenhaus, Sheila E. Menz, and Russell Spivak.