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Financial Services Law Insights and Observations

Treasury publishes risk assessments for money laundering, terrorist financing, and proliferation financing

Financial Crimes Of Interest to Non-US Persons Department of Treasury Anti-Money Laundering Combating the Financing of Terrorism

Financial Crimes

On March 1, the U.S. Treasury Department published the 2022 National Risk Assessments on money laundering, terrorist financing, and proliferation financing, which highlight significant illicit finance threats, vulnerabilities, and risks facing the United States.

The 2022 National Money Laundering Risk Assessment found that “[c]riminals continue to use a wide range of money laundering techniques, including traditional ones, to move and conceal illicit proceeds depending on what is available or convenient to them.” Crimes generating the largest amount of laundered illicit proceeds in or through the U.S. include fraud, drug trafficking, cybercrime, human trafficking and smuggling, and corruption. The assessment found that continued and emerging money laundering risks involve, among other things, the persistent misuse of legal entities, a lack of transparency in certain real estate transactions, merchants and professionals that misuse their positions or businesses, and compliance and supervision weaknesses at some regulated U.S. financial institutions. Additionally, operators of virtual asset service providers (VASPs) are reminded that violating the Bank Secrecy Act or neglecting regulatory requirements, “such as failing to establish effective AML programs or report suspicious activities,” present vulnerabilities to the financial system.

The findings of the 2022 National Terrorist Financing Risk Assessment, according to the press release, included that, with respect to foreign terrorist groups, “the most common form of financial support from U.S.-based individuals continues to be the transfer of small sums (several hundred to tens of thousands of dollars) to facilitators outside of the U.S. working on behalf of ISIS and its affiliates, Al-Qaida and its affiliates, and Hizballah.” For the first time, the assessment also analyzed funding methods used to support domestic violent extremists.

The 2022 National Proliferation Financing Risk Assessment found that most significant proliferation finance threats are posed by the Democratic People’s Republic of Korea followed by Iran. These networks misuse correspondent banking relationships and create front/shell companies to facilitate financial activity and conduct trade, and they generate significant revenue from the maritime sector. The press release stated that the assessment further found that these networks are beginning to “increasingly exploit[] the digital economy, including through the systematic mining and trading of virtual assets, and the hacking of virtual asset service providers.” In the upcoming weeks, Treasury will release the 2022 National Strategy for Combatting Terrorist and Other Illicit Finance, which will be informed by the analysis contained in these risk assessments and will share recommendations for addressing these highlighted threats.

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