US’ FATF Mutual Evaluation Issued: the DOJ response

FINANCIAL ACTION TASK FORCE REPORT RECOGNIZES U.S. ANTI-MONEY LAUNDERING AND COUNTER-TERRORIST FINANCING LEADERSHIP, BUT ACTION IS NEEDED ON BENEFICIAL OWNERSHIP

SHARE

 

December 1, 2016
Courtesy of By Assistant Attorney General Leslie Caldwell of the Criminal Division and Acting Assistant Attorney General Mary McCord of the National Security Division

The United States has long been a leader in the global effort to develop, implement, and promote the strong anti-money laundering and counter-terrorist financing (AML/CFT) regimes that are critical to protecting the international financial system from those who want to use it for illicit means.  In support of this global effort, the Financial Action Task Force (FATF)—the international standard-setting body for AML/CFT—established global AML/CFT standards and regularly conducts peer reviews, also called mutual evaluations, to ensure compliance with the standards.  Today, the FATF published its Mutual Evaluation Report of the United States.  

This assessment of the U.S. AML/CFT regime focused on our effectiveness in preventing and combating money laundering and terrorist financing.  Specifically, of the eleven effectiveness ratings, the U.S. received high ratings in an unprecedented four areas, as well as four ratings of substantial, two of moderate, and one rating of low.  The report acknowledges our strong AML/CFT regime and recognizes the success of the government architecture we have built since Sept. 11, 2001, to cut off the flow of funds and resources to terrorists and their supporters.

The United States received the highest possible ratings on investigating and prosecuting terrorist financing and recovering the proceeds of crime through asset forfeiture.  The report also confirms that the United States is successfully investigating and prosecuting money laundering, providing and seeking cooperation from our international partners, and seamlessly using financial intelligence to conduct money laundering and terrorist financing investigations.  

The report highlights the Department of Justice’s Kleptocracy Asset Recovery Initiative as a unique program to combat the money laundering threat posed by foreign corruption.  It also commends the department’s complex and often international prosecutions against persons and businesses—including major financial institutions—that enable money laundering related to narcotics trafficking, fraud, and other serious offenses.  The FATF noted the impact of the department’s 1,200 money laundering prosecutions each year and urged state authorities to increase enforcement in this area.  The report also underscores the effectiveness of the United States’ multi-agency approach to combating terrorism and terrorist financing, specifically the 104 Joint Terrorism Task Forces operating nation-wide and our “all tools” approach to combating terrorism, including use of our broad material support statutes and targeted financial sanctions.  

While the report recognizes areas where the United States excels, it also identifies areas where we have more work to do.  The United States received the lowest possible rating for our efforts to prevent criminals from using legal entities, or companies and corporations, to hide and move money or carry out illicit schemes.  FATF based its rating on the lack of a requirement in the United States to disclose the identity of the person who owns or controls a company—also known as the beneficial owner—to the government when the company is formed.  Although U.S. law enforcement agents can track down the true ownership of “anonymous” companies using investigative techniques, this can be time consuming and resource intensive.  

Full transparency of corporate ownership would strengthen our ability to trace illicit financial flows in a timely fashion and firmly declare that the United States will not be a safe haven for criminals and terrorists looking to disguise their identities for nefarious purposes.

Earlier this year, the Department of the Treasury published the final Customer Due Diligence Rule (CDD Rule) requiring financial institutions to collect beneficial ownership information when they open an account for a legal entity, but beneficial ownership legislation is also needed to collect beneficial ownership information when companies are formed. 

Putting such a law in place will require Congressional action, and the Justice Department has advocated for the passage of such legislation.  Most recently, in May 2016, the Obama Administration sent to Congress proposed legislation that would require companies formed within the United States to file beneficial ownership information with the Treasury Department, or face penalties for failure to comply.  This legislation has not been introduced, and without it, the U.S. continues to lag behind our global partners in preventing the flow of illicit money through our banking system and financial markets.   

As demonstrated by the FATF report, the United States has an unmatched AML/CFT regime, but there is room for improvement.  The Department of Justice strongly supports the Administration’s efforts to pass beneficial ownership legislation and will continue to work with Congress toward that goal, while continuing to demonstrate leadership in the global effort to protect the international financial system from abuse. 

The FATF Mutual Evaluation of the United States can be found here: http://www.fatf-gafi.org/[external link].

The Mutual Evaluation is a beast – weighing in at 3 GB in PDF format. The US largely gets excellent marks, except for a handful of issues including its Ultimate Beneficial Ownership data and unevenness in how it treats Designated Non-Financial Business Professions (DNFBP) such as financial advisors and lawyers. One thing caught my eye, though: FATF doesn’t like that there are threshold amounts for Suspicious Activity Report (SAR) filings. Mr. Watchlist says: nice to live in an ivory tower where you don’t have to report to shareholders….

Links:

Mutual Evaluation

DOJ Press Release

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s