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Financial Services Law Insights and Observations

Treasury issues 2022 national illicit finance strategy

Financial Crimes Of Interest to Non-US Persons Department of Treasury Illicit Finance Risk Management Anti-Money Laundering Combating the Financing of Terrorism Covid-19

Financial Crimes

On May 13, the U.S. Treasury Department issued the 2022 National Strategy for Combatting Terrorist and Other Illicit Financing (2022 Strategy). As required by federal law, the 2022 Strategy describes current U.S. government efforts to combat domestic and international illicit finance threats from terrorist financing, proliferation financing, and money laundering, and discusses potential risks, priorities and objectives, as well as areas for improvement. Among other things, the 2022 Strategy reflects challenges posed by the Covid-19 pandemic, the increasing digitization of financial services, and rising levels of corruption and fraud. Specifically, Treasury noted that 2022 risk assessments highlights threats “posed by the abuse of legal entities, the complicity of professionals that misuse their positions or businesses, small-sum funding of domestic violent extremism networks, the effective use of front and shell companies in proliferation finance, and the exploitation of the digital economy.”

According to Treasury, the 2022 Strategy, along with the agency’s 2022 National Money Laundering Risk Assessment (covered by InfoBytes here), “will assist financial institutions in assessing the illicit finance risk exposure of their businesses and support the construction and maintenance of a risk-based approach to countering illicit finance for government agencies and policymakers.”

Specifically, to protect the U.S. financial system from corruption and other illicit finance threats, the 2022 Strategy outlined four priorities and 14 supporting actions to address these threats. These include:

  • closing legal and regulatory gaps in the U.S. anti-money laundering/counter the financing of terrorism (AML/CFT) framework that are used to anonymously access the U.S. financial system through shell companies and all-cash real estate purchases;
  • increasing the efficiency of the U.S. AML/CFT regulatory framework “by providing clear compliance guidance, sharing information appropriately, and fully funding supervision and enforcement”;
  • enhancing the operational effectiveness of law enforcement, other U.S. government agencies, and international partnerships to prevent illicit actors from accessing safe havens; and
  • enabling technological innovation while mitigating risk to stay ahead of new avenues for abuse through virtual assets and other new financial products, services, and activities.

The same day the U.S. and Mexico announced their commitment to establish a working group on anti-corruption, which will primarily focus on high-level strategic responses to public corruption. The announcement follows a recent agreement between delegates from the two countries to continue expanding information-sharing efforts to improve bilateral efforts for countering illicit finance.