Anti-Money Laundering An Overview for Congress Updated March 1 2017 Congressional Research Service https crsreports congress gov R44776 Anti-Money Laundering An Overview for Congress Summary Anti-money laundering AML refers to efforts to prevent criminal exploitation of financial systems to conceal the location ownership source nature or control of illicit proceeds Despite the existence of long-standing domestic regulatory and enforcement mechanisms as well as international commitments and guidance on best practices policymakers remain challenged to identify and address policy gaps and new laundering methods that criminals exploit According to United Nations estimates recognized by the U S Department of the Treasury criminals in the United States generate some $300 billion in illicit proceeds that might involve money laundering Rough International Monetary Fund estimates also indicate that the global volume of money laundering could amount to as much as 2 7% of the world’s gross domestic product or $1 6 trillion annually Money laundering is broadly recognized to have potentially significant economic and political consequences at both national and international levels Despite robust AML efforts in the United States the ability to counter money laundering effectively remains challenged by a variety of factors These include       the scale of global money laundering the diversity of illicit methods to move and store ill-gotten proceeds through the international financial system the introduction of new and emerging threats e g cyber-related financial crimes the ongoing use of old methods e g bulk cash smuggling gaps in legal regulatory and enforcement regimes including uneven availability of international training and technical assistance for AML purposes and the costs associated with financial institution compliance with global AML guidance and national laws AML Policy Framework In the United States the legislative foundation for domestic AML originated in 1970 with the Bank Secrecy Act BSA of 1970 and its major component the Currency and Foreign Transaction Reporting Act Amendments to the BSA and related provisions in the 1980s and 1990s expanded AML policy tools available to combat crime particularly drug trafficking and prevent criminals from laundering their illicitly derived profits Key elements to the BSA’s AML legal framework which are codified in Titles 12 Banks and Banking and 31 Money and Finance of the U S Code include requirements for customer identification recordkeeping reporting and compliance programs intended to identify and prevent money laundering abuses Substantive criminal statutes in Titles 31 and 18 Crimes and Criminal Procedures of the U S Code prohibit money laundering and related activities and establish civil penalties and forfeiture provisions Moreover federal authorities have applied administrative forfeiture non-conviction based forfeiture and criminal forfeiture tools In response to the terrorist attacks on the U S homeland on September 11 2001 Congress expanded the BSA’s AML policy framework to incorporate additional provisions to combat the financing of terrorism CFT Although CFT is not the primary focus of this CRS report post9 11 legislation provided the executive branch with greater authority and additional tools to counter the convergence of illicit threats including the financial dimensions of organized crime corruption and terrorism Congressional Research Service Anti-Money Laundering An Overview for Congress Policy Outlook for the 115th Congress Although CFT will likely remain a pressing national security concern for policymakers and Congress some see the beginning of the 115th Congress as an opportunity to revisit the existing AML policy framework assess its effectiveness and propose regulatory and statutory changes Such efforts could further address issues raised in hearings and proposed legislation during the 114th Congress including beneficial ownership the application of targeted financial sanctions and barriers to international AML information sharing Drawing from past legislative activity the 115th Congress may also revisit proposals to require the executive branch to develop a roadmap for identifying key AML policy challenges and balancing AML priorities in a national strategy Some observers have gone further to propose broader changes to the BSA AML regime The 115th Congress may also seek to address tensions that remain in balancing the policy objectives of improving financial services access and inclusion while also accounting for money laundering risks and vulnerabilities that may result in the exclusion or “de-risking” of others from the international financial system Congressional Research Service Anti-Money Laundering An Overview for Congress Contents Introduction 1 Scope of the Problem 1 Anti-Money Laundering Policy Overview 5 U S Legal Framework 5 Reporting Requirements 6 Customer Identification and Due Diligence Requirements 8 Recordkeeping Requirements 10 Sanctions Compliance 10 National Strategies 11 Agency Roles 13 Offices within the Department of the Treasury 13 Federal Regulators and Oversight Bodies 15 Federal Prosecution and Enforcement 16 International Training and Technical Assistance 18 International Framework 20 United Nations 20 Financial Action Task Force FATF 21 World Bank and International Monetary Fund 24 Outlook for the 115th Congress 25 Figures Figure 1 Global Overview of Money Laundering Hotspots 5 Figure 2 Fines Forfeitures and Penalties Collected from Financial Institutions for BSA AML Violations 17 Figure 3 Map of FATF Members and Observer Countries 22 Figure 4 Map of FATF-Style Regional Bodies FSRBs 23 Tables Table 1 Treasury’s OTA Technical Assistance Funding FY2010-present 19 Table 2 State Department’s Foreign Assistance to Combat Terrorist Financing 20 Contacts Author Information 26 Congressional Research Service Anti-Money Laundering An Overview for Congress Introduction Money laundering is a term generally associated with various types of financial transactions that are conducted by criminals to conceal the location ownership source nature or control of illicit proceeds In the process illicit proceeds are made virtually unrecognizable from proceeds derived from legitimate sources and thus are usable within the national and international financial system Money laundering is not a new problem and efforts to stem such activity remain a global policy concern Money laundering occurs in three stages which in practice may involve additional complexity 1  The first stage is “placement” and involves the introduction of illicit funds into the financial system  The second stage involves “layering ” whereby illicitly placed funds undergo a series of processes to conceal their true source and ownership The third stage is “integration ” at which point illicit funds become indistinguishable from legitimately obtained funds and flow undetected through the financial system  Anti-money laundering AML policies are chiefly governed by national laws and regulations that establish the parameters of legal financial activity and the responsibilities of financial institutions and related sectors to comply with AML requirements In the United States a robust policy apparatus is in place to implement national laws through financial regulations enforcement actions including prosecutions and targeted sanctions The U S government also supports the improvement of foreign government legal regimes and technical capacity for AML International treaty instruments that address crime provide some tools to encourage international cooperation on financial crime matters Several international institutions provide standard-setting guidance and maintain capabilities to monitor and assess the status of national AML policies Multilateral institutions and donor nations also provide training and technical assistance to improve AML capabilities Halting the introduction and circulation of criminally generated proceeds in the financial system and ultimately depriving criminals from using illicit wealth remains a challenge Despite the existence of long-standing domestic regulatory and enforcement mechanisms as well as international commitments and guidance on best practices policymakers are challenged to identify and address policy gaps and new laundering methods that criminals continue to exploit Moreover policymakers also may attempt to balance AML efforts with principles of financial inclusion including providing access to financial services in developing countries and avoiding unnecessary administrative and compliance burdens being placed on the public and private sectors Scope of the Problem The scope of money laundering as a global problem is often framed in terms of the volume of illegal transactions breadth of geographic concerns and varied consequences resulting from such activity Money laundering is a difficult phenomenon to accurately measure In 1998 the International Monetary Fund IMF released a “consensus range” estimate of money laundering 1 U S Department of the Treasury National Money Laundering Risk Assessment p 2 June 12 2015 Congressional Research Service R44776 · VERSION 3 · UPDATED 1 Anti-Money Laundering An Overview for Congress transactions totaling some 2%-5% of global gross domestic product GDP 2 Based on 2009 data the United Nations U N reviewed in 2011 existing national and international studies on money laundering and global crime proceeds to conclude that the scope of money laundering likely remained within the bounds of the IMF’s rough estimate approximately 2 7% of global GDP or $1 6 trillion 3 Due to its global dominance the U S dollar generates trillions of dollars daily in transactions through U S financial institutions which in turn exposes the U S financial system to potential money laundering activity and cross-border illicit financial flows 4 The U N report further estimated that the United States in 2010 likely generated some $300 billion in illicit proceeds excluding tax evasion or roughly 2% of U S GDP In 2015 the U S Department of the Treasury confirmed that the U N ’s estimates are “comparable to U S estimates ”5 As in the United States international surveys indicate that the most significant sources of illicit proceeds are generated through white collar crime i e fraud identity theft and tax evasion and organized crime particularly drug trafficking 6 Smaller sums which are nevertheless significant for political and security reasons are associated with public corruption and international terrorism In seeking to clean dirty money launderers wield a wide range of methods to conceal from authorities the true origins ownership and volume of illicit proceeds Particularly attractive are methods that preserve anonymity e g use and movement of cash avoid AML-related recordkeeping and reporting requirements e g structuring bank deposit and withdrawal and involve techniques that are hard for authorities to detect e g trade-based money laundering Money laundering may involve the use of complicit individuals e g nominees corrupt officials banking insiders front company business owners and illegal financial service providers e g unregistered money services businesses Money laundering may also involve the exploitation of legal off-shore corporate structures that obscure beneficial ownership e g shell companies and permissive foreign jurisdictions including those accessible by correspondent banking relationships and business sectors with potentially lax AML controls 7 “Beneficial owner” refers to the natural person who directly or indirectly controls or manages a legal entity and its assets 8 According to the Financial Action 2 Michel Camdessus Managing Director of the International Monetary Fund IMF address at the plenary meeting of the Financial Action Task Force FATF “Money Laundering The Importance of International Countermeasures ” February 10 1998 3 United Nations Office on Drugs and Crime UNODC Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Organized Crimes October 2011 4 FATF Mutual Evaluation of the United States December 2016 5 U S Department of the Treasury National Money Laundering Risk Assessment June 12 2015 Aggregating outside sources Treasury reported that illicit drugs accounted for approximately $64 billion of annual financial crime proceeds while some $236 billion is generated mostly from fraud e g healthcare fraud insurance fraud identity theft tax fraud mortgage fraud securities fraud and retail and consumer fraud as well as human smuggling organized crime e g extortion illegal gambling kidnapping loan sharking murder prostitution and racketeering and public corruption 6 See FATF Global Money Laundering and Terrorist Financing Threat Assessment July 2010 UNODC The Globalization of Crime A Transnational Organized Crime Threat Assessment June 2010 and Jeremy Haken Global Financial Integrity GFI Transnational Crime in the Developing World February 2011 7 According to the Wolfsberg Group an association of 13 global banks that develops guidance on minimizing AML and CFT risks “Correspondent Banking is the provision of a current or other liability account and related services to another financial institution including affiliates used for the execution of third party payments and trade finance as well as its own cash clearing liquidity management and short-term borrowing or investment needs in a particular currency ” See The Wolfsberg Group Wolfsberg Anti-Money Laundering Principles for Correspondent Banking 2014 8 The White House Obama The U S Action Plan to Implement the G-20 High Level Principles on Beneficial Ownership October 16 2015 Congressional Research Service R44776 · VERSION 3 · UPDATED 2 Anti-Money Laundering An Overview for Congress Task Force FATF an international AML standard-setting body the lack of available information on the legal and beneficial ownership of corporate vehicles increases their vulnerability to exploitation for the purposes of laundering illicit proceeds 9 The Treasury Department describes money laundering as “a necessary consequence of almost all profit generating crimes and can occur almost anywhere in the world ”10 As a global issue the effectiveness of international AML efforts is often described as dependent on the international community’s weakest links countries or jurisdictions that fail to establish appropriate AML safeguards Unchecked money laundering can have global consequences it can       Undermine the integrity of the international financial system reduce consumer confidence in the financial system and damage the reputation of financial regulatory bodies Introduce economic distortions that affect economic growth international trade business competitiveness money demand capital flows foreign investments exchange rates and securities markets Violate border and customs controls through the facilitation of bulk cash smuggling and trade-based laundering methods that evade duties tariffs and taxes—legitimate sources of government revenue that become unavailable for public expenditure Contribute to and exacerbate state fragility by rewarding illicit behavior at the expense of transparency good governance the rule of law and accountability of public and private institutions Enable criminals to sustain their networks and realize profits generated by their illicit activities including political corruption Facilitate the financing of terrorism 11 Selected Global Assessments of Money Laundering Vulnerability One way in which the scope of the money laundering can be viewed is in terms of the global breadth of geographic concerns In evaluating global vulnerability to money laundering the United States and the international community often refer to several country lists compiled variously by the Financial Action Task Force FATF and the U S Departments of State and the Treasury see Figure 1 below Financial Action Task Force List Three times each year FATF identifies jurisdictions with strategic AML CFT combating the financing of terrorism deficiencies with the aim of working with such jurisdictions to mitigate the risks they pose to the international financial system In October 2016 FATF jurisdictions with strategic deficiencies included Afghanistan Bosnia and Herzegovina Iraq Laos Syria Uganda Vanuatu and Yemen 12 In addition to identifying Iran as a jurisdiction with strategic deficiencies FATF called on its members and other jurisdictions “to apply enhanced due diligence measures proportionate to the risks arising from the jurisdiction ” With respect to North Korea which FATF described as having failed to address its significant AML CFT deficiencies FATF also called on its members and other jurisdictions “to apply counter-measures to protect the international financial system from the ongoing and substantial money laundering and terrorist financing ML TF risks ”13 9 FATF Guidance on Transparency and Beneficial Ownership October 2014 U S Department of the Treasury National Money Laundering Risk Assessment June 12 2015 11 See U S Department of the Treasury National Money Laundering Risk Assessment June 12 2015 FATF Global Money Laundering and Terrorist Financing Threat Assessment July 2010 UNODC The Globalization of Crime A Transnational Organized Crime Threat Assessment June 2010 12 FATF Improving Global AML CFT Compliance Ongoing Process October 21 2016 13 FATF Public Statement October 21 2016 10 Congressional Research Service R44776 · VERSION 3 · UPDATED 3 Anti-Money Laundering An Overview for Congress U S Department of State List Each year in March the Department of State’s Bureau of International Narcotics and Law Enforcement Affairs INL issues a two-volume report to Congress titled the International Narcotics Control Strategy Report INCSR required by Section 489 of the Foreign Assistance Act of 1961 as amended 22 U S C 2291 In addition to requiring the President to annually identify a list of major illicit drug source and trafficking countries the INCSR also requires the State Department to identify “major” money laundering countries “whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking ” In practice the annual INCSR list of major money laundering countries includes those whose financial institutions non-financial businesses and professions and other value transfer systems are used to conduct transactions involving significant amounts of proceeds from “all serious crime ”14 U S Department of the Treasury List 31 U S C 5318A added by Section 311 of the USA PATRIOT Act authorizes Treasury to identify foreign jurisdictions financial institutions international transactions or types of accounts that are of “primary money laundering concern ” Discussed further below Section 311 is a potentially powerful regulatory tool that Treasury’s Financial Crimes Enforcement Network FinCEN has applied in limited circumstances Current primary money laundering concerns include three countries Burma North Korea and Iran and five jurisdictions or financial institutions Banco Delta Asia the Commercial Bank of Syria FMBE Bank Ltd the Halawi Exchange and the Kassem Rmeiti Co For Exchange 15 14 U S Department of State International Narcotics and Law Enforcement Affairs Bureau International Narcotics Control Strategy Report Vol 2 “Money Laundering and Financial Crimes ” March 2016 The 2015 “major” money laundering countries were identified as the following Afghanistan Antiqua and Barbuda Argentina Australia Austria Bahamas Belize Bolivia Brazil British Virgin Islands Burma Cambodia Canada Cayman Islands China Colombia Costa Rica Curacao Cyprus Dominican Republic France Germany Greece Guatemala Guernsey Guinea Bissau Haiti Hong Kong India Indonesia Iran Iraq Isle of Man Israel Italy Japan Jersey Kenya Latvia Lebanon Liechtenstein Luxembourg Macau Mexico Netherlands Nigeria Pakistan Panama Paraguay Philippines Russia Singapore Sint Maarten Somalia Spain Switzerland Taiwan Thailand Turkey Ukraine United Arab Emirates United Kingdom United States Uruguay Venezuela West Bank and Gaza and Zimbabwe 15 U S Department of the Treasury Financial Crimes Enforcement Network FinCEN 311 Special Measures webpage https www fincen gov resources statutes-and-regulations 311-special-measures Congressional Research Service R44776 · VERSION 3 · UPDATED 4 Anti-Money Laundering An Overview for Congress Figure 1 Global Overview of Money Laundering Hotspots Source Graphic prepared by CRS based on information published by the FATF October 2016 press releases U S Departments of State 2016 International Narcotics Control Strategy Report and the Treasury FinCEN 311 special measures and the White House September 2016 presidential determination on major illicit drug producing or transit countries for FY2017 Anti-Money Laundering Policy Overview U S Legal Framework In the United States the legislative foundation for domestic AML originated in 1970 with the Bank Secrecy Act BSA of 1970 and its major component the Currency and Foreign Transaction Reporting Act Deriving from an emerging recognition that financial transaction records have a “high degree of usefulness in criminal tax or regulatory investigations or proceedings ” the legislation authorized the Secretary of the Treasury to require financial institutions to establish and adhere to certain AML practices 16 Amendments to the BSA and related provisions in the 1980s and 1990s expanded AML policy tools available to combat crime particularly drug trafficking and prevent criminals from laundering their illicitly derived profits Key elements to the BSA’s AML legal framework which are codified in Titles 12 Banks and Banking and 31 Money and Finance of the U S Code include requirements for reporting customer identification and due diligence recordkeeping and the establishment and maintenance of BSA AML compliance programs Bank examiners are required to probe banking entities on 31 U S C 5311 et seq and 12 U S C 1786 q 1818 s 1829b and 1951-1959 The definition of a “financial institution ” a term which has evolved since 1970 to expand beyond banks is located at 31 U S C 5312 This section discusses the federal response to anti-money laundering but states may have additional requirements 16 Congressional Research Service R44776 · VERSION 3 · UPDATED 5 Anti-Money Laundering An Overview for Congress the effectiveness of AML policies and procedures Substantive criminal statutes in Titles 31 and 18 Crimes and Criminal Procedures of the U S Code prohibit money laundering and related activities and establish civil penalties and forfeiture provisions see text box below on enforcement actions 17 The establishment of a “follow the money” approach among federal law enforcement agencies in pursuing predicate offense investigations has contributed to on average 1 200 money laundering-related convictions annually 18 Moreover federal authorities apply administrative forfeiture non-conviction based forfeiture and criminal forfeiture tools to confiscate assets with more than $4 4 billion in assets confiscated in 2014 19 In response to the terrorist attacks on the U S homeland on September 11 2001 Congress expanded the BSA’s AML policy framework to incorporate additional provisions to combat the financing of terrorism CFT Legislation following the September 11 attacks including Title III of the USA PATRIOT Act of 2001 the International Money Laundering Abatement and AntiTerrorist Financing Act of 2001 provided the executive branch with greater authority and additional tools to counter the convergence of illicit threats including the financial dimensions of organized crime corruption and terrorism 20 Reporting Requirements The BSA’s AML policy framework is premised on the effective implementation primarily by financial institutions of suspicious activity monitoring systems The accurate timely and complete reporting of suspicious activity to the Treasury Department ensures that situations that may warrant further investigation are flagged for law enforcement authorities Other reports are variously required to be submitted by individuals transporting large amounts of cash internationally persons with large foreign financial interests and nonfinancial entities conducting large cash transactions Other reporting requirements are unique to specific countries jurisdictions or situations Among such reporting requirements are the following  Suspicious activity reports SARs FinCEN21 has issued implementing regulations pursuant to 31 U S C 5318 requiring a broad range of entities covered by the BSA’s definition of “financial institution”22 to file SARs on “any suspicious transaction relevant to a possible violation of law or regulation ” Separate regulations specify SAR reporting requirements for banks casinos and See 18 U S C 1956 on “laundering of monetary instruments ” 18 U S C 1957 on “engaging in monetary transactions in property derived from specified unlawful activity ” 18 U S C 1960 on “prohibition of unlicensed money transmitting businesses ” 31 U S C 5322 on “criminal penalties” for failing to file currency transaction reports CTRs currency or monetary instruments reports CMIRs or form 8300 on reporting of cash payments over $10 000 received in a trade or business 31 U S C 5324 on “structuring transactions to evade reporting requirement s ” and 31 U S C 5332 on “bulk cash smuggling into or out of the United States ” See also CRS Report RL33315 Money Laundering An Overview of 18 U S C 1956 and Related Federal Criminal Law by Charles Doyle 18 FATF Mutual Evaluation of the United States December 2016 19 Ibid 20 115 Stat 272 For further information see CRS Report RL31208 International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 Title III of P L 107-56 USA PATRIOT Act by M Maureen Murphy See also George A Lyden “The International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 Congress Wears a Blindfold While Giving Money Laundering Legislation a Facelift ” Fordham Journal of Corporate and Financial Law Vol 8 No 1 2003 pp 201-243 21 Under 31 C F R 1010 810 the Director of Financial Crimes Enforcement Network FinCEN has been delegated “ o verall authority for enforcement and compliance including coordination and direction of procedures and activities of all other agencies exercising delegated authority under the Bank Secrecy Act ” 22 This definition of “financial institution” can be found in 31 U S C 5312 a 2 17 Congressional Research Service R44776 · VERSION 3 · UPDATED 6 Anti-Money Laundering An Overview for Congress     card clubs money services businesses brokers or dealers in securities mutual funds insurance companies futures commission merchants and introducing brokers in commodities dealers in precious metals precious stones or jewels operators of credit card systems loan or financing companies and housing government sponsored enterprises 23 Currency transaction reports CTRs Implementing regulations pursuant to 31 U S C 5313 require all financial institutions—including for example money services businesses and casinos—to file CTRs for each transaction or group of related cash transactions in a day that aggregates to more than $10 000 24 IRS Form 8300 is used for trades and businesses to report cash payments of more than $10 000 25 Currency or monetary instruments reports CMIRs Implementing regulations pursuant to 31 U S C 5316 require individuals to report the import or export of more than $10 000 in monetary instruments e g currency traveler’s checks and all bearer negotiable financial instruments 26 Foreign bank and financial accounts reporting FBAR FinCEN regulations issued pursuant to 31 U S C 5314 require U S persons to file an FBAR “if the United States person had a financial interest in or signature authority over at least one financial account located outside of the United States and the aggregate value of all foreign financial accounts exceeded $10 000 at any time during the calendar year reported ”27 Geographic targeting orders GTOs Pursuant to 31 U S C 5326 FinCEN has authority to impose recordkeeping and reporting requirements on domestic financial institutions or nonfinancial businesses in a particular geographic area in order to assist regulators and law enforcement agencies in identifying criminal activity In the absence of extensions such GTOs may only remain in effect for a maximum of 180 days Recent Policy Developments on GTOs In recent years FinCEN appears to have begun to rely more heavily on Geographic Targeting Orders GTOs to address long-standing and acute AML threats a tool that was first authorized in 1988 31 U S C 5326 A GTO imposes additional but time-limited recordkeeping and reporting requirements on domestic financial institutions or nonfinancial businesses in a particular geographic area in order to assist regulators and law enforcement agencies in identifying criminal activity In the absence of extensions GTOs may only remain in effect for a maximum of 180 days Several recent GTOs have been used to enhance U S efforts to combat trade-based money laundering TBML and drug trafficking-related money laundering In addition to its temporary and geographically 23 Subpart C of the regulations applicable to the various types of financial institutions specifies particular requirements for filing Suspicious Activity Reports SARs SAR requirements for banks are found in 31 C F R 1010 320 casinos and card clubs 31 C F R 1020 320 money services businesses 31 C F R 1022 320 brokers or dealers in securities 31 C F R 1023 320 mutual funds 31 C F R 1024 320 insurance companies 31 C F R 1025 320 futures commission merchants and introducing brokers in commodities 31 C F R 1026 320 dealers in precious metals precious stones or jewels 31 C F R 1027 320 operators of credit card systems 31 C F R 1028 320 loan or financing companies 31 C F R 1029 320 and housing government sponsored enterprises 31 C F R 1030 320 24 31 C F R 1010 310-1010 314 25 31 U S C 533 26 31 C F R 1010 340 27 See FinCEN “Report Foreign Bank and Financial Accounts ” webpage https www fincen gov report-foreign-bankand-financial-accounts Congressional Research Service R44776 · VERSION 3 · UPDATED 7 Anti-Money Laundering An Overview for Congress limited scope GTOs are also confined to address monetary instruments On May 5 2016 the Obama Administration proposed a legislative amendment to the Treasury Department’s GTO authority that would replace language referring to coins and currency with “funds ” thereby including a broader range of financial services such as wire transfers  Comprehensive Iran Sanctions Accountability and Divestment Act CISADA 28 reporting Regulations issued by FinCEN29 require U S banks upon receipt of a written request from FinCEN to report on whether they maintain correspondent accounts or payable through accounts for foreign financial institutions which maintain correspondent accounts with Iranian-linked financial institutions designated by the United States for sanctions U S banks must also inquire as to and report on whether such foreign banks have processed other transactions directly or indirectly for Iranian-linked and sanctioned financial institutions or for Iran’s Islamic Revolutionary Guard Corps 30  Special measures 31 U S C 5318A as added by Section 311 of the USA PATRIOT Act authorizes the imposition of certain regulatory restrictions known as “special measures ” upon finding that a jurisdiction outside the United States a financial institution outside the United States a class of transactions involving a jurisdiction outside the United States or a type of account is “of primary money laundering concern ”31 Most of the special measures that may be imposed involve detailed recordkeeping and reporting requirements relating to underlying transactions and beneficial ownership of accounts 32 Section 311 is administered by FinCEN pursuant to delegation of authority from the Secretary of the Treasury Institution of “special measures’ requires consultation with the Secretary of State the Attorney General and the Chairman of the Federal Reserve Board as well as with other appropriate federal regulators Customer Identification and Due Diligence Requirements FinCEN has issued regulations requiring various types of financial institutions to establish antimoney laundering programs 33 Such regulations require a financial institution to set internal policies procedures and processes for customer identification and due diligence along with other requirements 34 FinCEN for example requires banks to have a customer identification 28 P L 111-195 124 Stat 1312 1332 Pursuant to 31 C F R Part 1060 implementing Section 104 e 1 B of the Comprehensive Iran Sanctions Accountability and Divestment Act CISADA 30 31 C F R 1060 300 31 31 U S C 5318 32 The strictest special measure known as the “Fifth Special Measure ” could involve prohibiting the maintenance of payable-through or correspondent accounts for such institutions or jurisdictions and thus could effectively eliminate their ability to access the U S financial system 33 Pursuant to 31 U S C 5318 h FinCEN has issued regulations requiring anti-money laundering programs for banks savings associations and credit unions regulated only by a federal financial regulator 31 C F R 1021 210 casinos 31 C F R 1020 210 money services businesses 31 C F R 1022 210 brokers or dealers in securities 31 C F R 1023 210 mutual funds 31 C F R 1024 210 insurance companies 31 C F R 1025 210 futures commission merchants and introducing brokers in commodities 31 C F R 1026 210 dealers in precious metals precious stones or jewels 31 C F R 1027 210 operators of credit card systems 31 C F R 1028 210 loan or finance companies 31 C F R 1029 210 housing government-sponsored enterprises 31 C F R 1030 210 34 See 31 U S C 5318 h 29 Congressional Research Service R44776 · VERSION 3 · UPDATED 8 Anti-Money Laundering An Overview for Congress program including the verification of account holders’ name and address 35 Implementing regulations specify that before opening a new account banks must also obtain account holders’ date of birth and either a taxpayer identification number for U S persons or a comparable government-issued identifying document for non-U S persons 36 Beyond customer identification and verification regulators examine the appropriateness and comprehensiveness of financial institutions’ customer due diligence CDD efforts CDD includes assessing customer risk and conducting enhanced due diligence EDD on customers that pose greater risks and in turn greater money laundering exposure to banks 37 Minimum standards for anti-money laundering programs for banks are found in 31 C F R 1010 610 regarding due diligence programs for correspondent accounts for foreign financial institutions and in 31 C F R 1010 620 regarding due diligence programs for private banking accounts These are supplemented by guidance and regulations issued by the federal banking regulators 38 In addition to recordkeeping requirements FinCEN also requires domestic financial institutions and agencies to obtain and retain additional customer information associated with targeted jurisdictions financial institutions international transactions or types of accounts of primary money laundering concern—including information relating to beneficial ownership certain payable-through accounts and certain correspondent accounts 39 Customer Due Diligence CDD Requirements for Financial Institutions On May 11 2016 the Treasury Department’s Financial Crimes Enforcement Network FinCEN issued a final rule on CDD pursuant to its BSA regulatory authorities 40 The regulations cover financial institutions that are currently required to develop AML programs—for example banks securities brokers or dealers mutual funds futures commission merchants and introducing brokers in commodities The final rule prescribes a two-year implementation period for the new regulations Central to the new CDD regulations are  The establishment and maintenance of procedures to identify and verify beneficial owners of a legal entity opening a new account—a new requirement which financial institutions would have until May 11 2018 to implement Identification is required for individual beneficial owners owning 25% or more of the legal entity and for one individual in the management of the entity Such procedures would be similar to existing procedures for identifying and verifying the identity of accountholders already in effect pursuant to 31 U S C 5318 as amended by the USA PATRIOT Act  A requirement for financial institutions to develop customer risk profiles and to update customer information on a risk basis for the purposes of ongoing monitoring and suspicious transaction reporting These requirements make explicit what has been an implicit component of BSA AML compliance programs Under 35 Pursuant to 31 U S C 5318 as amended by Section 326 of the USA PATRIOT Act For non-U S persons such comparable documentation may include one or more of the following a taxpayer identification number a passport number and country of issuance an alien identification card number or a number and country of issuance of any other unexpired government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard 37 EDD may include obtaining customer information regarding the purpose of the account source of funds and wealth identity of individuals with ownership or control of the account occupation or type of business of those with ownership or control of the account financial statements banking references domicile of where the business is organized proximity to the financial institution of the customer’s residence place of employment or place of business description of the customer’s primary trade area and whether international transactions are expected to be routine description of the business operations the anticipated volume of currency and total sales and a list of major customers and suppliers explanations for changes in account activity 38 See Federal Financial Institution Examination Council Bank Secrecy Act Anti-Money Laundering InfoBase “BSA AML Compliance Program—Overview ” https www ffiec gov bsa_aml_infobase pages_manual OLM_007 htm 39 Pursuant to 31 U S C 5318A 40 See Federal Register Vol 81 No 91 May 11 2016 pp 29398-29458 36 Congressional Research Service R44776 · VERSION 3 · UPDATED 9 Anti-Money Laundering An Overview for Congress current SAR regulations for example banks must file an SAR when transactions appear to have no business or apparent lawful purpose or when customers engage in unusual and unexplainable financial activity Without establishing a profile of the customer’s usual business and financial transactions and monitoring and updating such a profile the bank would be unable to spot unusual or extraordinary transactions that may warrant SAR reporting The May 2016 final rule was the culmination of efforts that began in March 2012 when FinCEN issued an advance notice of proposed rulemaking which was followed by a series of public hearings a notice of proposed rulemaking in August 2014 and the publication of a preliminary regulatory impact assessment and regulatory flexibility analysis i e cost-benefit assessment in December 2015 As part of the May 2016 final rule FinCEN assessed that the annual cost of the final rule could range between $148 million and $153 million under low-cost scenarios and $282 million and $287 million under high-cost scenarios The Treasury Department expects that anticipated benefits in terms of reduced illicit proceeds generated annually in the United States due to financial crimes outweigh the costs Recordkeeping Requirements In addition to required reporting and customer identification requirements financial institutions are required to maintain certain financial records often for at least five years Such recordkeeping requirements are designed to assist authorities during an investigation and to assist financial institutions as part of their AML compliance programs in revealing patterns of unusual activity 41 The system in place to preserve such records is examined by financial regulators Basic recordkeeping requirements were established by the BSA in 1970 and expanded over time 42 Records include customer identification material as well as explanations of the methods used to verify customer identification Records also include but are not limited to account statements checks and deposits in excess of $100 international transactions over $10 000 purchase of monetary instruments e g bank checks or drafts cashier’s checks money orders and traveler’s checks of at least $3 000 funds transfers of at least $3 000 and actions taken in response to U S economic sanctions programs including blocked assets or funds and rejected transactions Sanctions Compliance The United States often imposes economic sanctions in response to threats to the nation’s security foreign policy or economy Many of the existing financial sanctions programs are based on the International Emergency Economic Powers Act IEEPA 50 U S C 1701 et seq which authorizes the President upon declaration of a national emergency pursuant to authorities stated in the National Emergencies Act 50 U S C 1601 et seq with respect to an “unusual and extraordinary threat which has its source in whole or in part outside the United States ” to investigate regulate or prohibit a variety of asset and property transactions subject to U S jurisdiction The Office of Foreign Assets Control OFAC in the Treasury Department administers and enforces IEEPA-based financial sanctions programs as well as other authorized sanctions programs against foreign countries political regimes terrorists narcotics traffickers transnational organized criminals and proliferators of weapons of mass destruction Implementing regulations require financial institutions to comply with sanctions provisions that variously prohibit financial transactions and freeze or block assets and property under U S jurisdiction associated with designated individuals and entities Regulators examine banks for 41 See 31 C F R 103 For example Funds Transfer Record Keeping and Travel Rule Requirements are found at 31 C F R 103 33 e and g and the Record retention requirements which require a bank to retain either the original microfilm or other copy or reproduction of the records required by the BSA for at least five years are found at 31 C F R 103 22 d 103 27 a 3 103 29 c 103 33 a - c 103 34 a 1 ii and 103 34 b 1 - 13 42 Congressional Research Service R44776 · VERSION 3 · UPDATED 10 Anti-Money Laundering An Overview for Congress compliance with sanctions provisions violations are subject to potential civil and criminal penalties The USA PATRIOT Act’s “Section 311” Special Measures 31 U S C 5318A as added by Section 311 of the USA PATRIOT Act established a process for identifying and imposing a range of up to five “special measures” against foreign jurisdictions financial institutions international transactions or types of accounts determined by the Secretary of the Treasury to be of “primary money laundering concern ” As discussed above several of these special measures involve enhanced requirements for reporting and customer identification The fifth and most severe of the special measures authorizes the Secretary of the Treasury to impose prohibitions on the opening or maintaining in the United States of a correspondent account or payable-through account by any domestic financial institution or agency for or on behalf of a foreign banking institution—if such accounts or transactions involve a designated jurisdiction or institution determined to be of primary money laundering concern In making a finding with respect to a jurisdiction of primary money laundering concern 31 U S C 5318A requires the Secretary of the Treasury to consider several factors including  whether organized criminal groups international terrorists or entities involved in the proliferation of weapons of mass destruction WMD or missiles conduct transactions in that jurisdiction and the extent to which that jurisdiction is characterized by political corruption  the extent to which bank secrecy or special regulatory advantages to foreign persons are offered in that jurisdiction disproportions in the size of the local economy vis-a-vis the volume of financial transactions and whether it has been identified as an offshore banking or secrecy haven and  the strength and effectiveness of that jurisdiction’s AML CFT regulatory regime including the administration of bank supervision the experiences of U S officials in obtaining financial information for law enforcement or regulatory purposes and whether the United States maintains a mutual legal assistance treaty with that jurisdiction As of December 2016 FinCEN has taken action pursuant to 31 U S C 5318A on 24 jurisdictions financial institutions or international transactions of primary money laundering concern—8 of which remain in effect National Strategies In the past Congress has required the President to develop national strategies for combating money laundering and related financial crimes Pursuant to the Money Laundering and Financial Crimes Strategy Act of 1998 as amended the Administrations of Bill Clinton and George W Bush transmitted national strategies on money laundering to Congress in 1999 2000 2001 2002 2003 2005 and 2007 the only years for which such strategy reports were required by Congress 43 In 2006 the Bush Administration also released a U S Money Laundering Threat Assessment In 2015 the Obama Administration released a National Money Laundering Risk Assessment and a National Terrorist Financing Risk Assessment Pursuant to Chapter 8 of Part I of the Foreign Assistance Act of 1961 FAA as amended by the International Narcotics Control Act of 1992 and the Foreign Relations Authorization Act Fiscal Year 2003 P L 107-228 the U S Department of State’s Bureau of International Narcotics Control and Law Enforcement Affairs INL annually issues the International Narcotics Control 43 In addition to requiring a national strategy on money laundering in selected years between 1999 and 2007 the Money Laundering and Financial Crime Strategy Act of 1998 conceived of “high-risk money laundering and related financial crime areas” 31 U S C 5342 The purpose of designating such areas would be to concentrate law enforcement action to address financial crime in those jurisdictions and encourage a “comprehensive approach” to responding to such crimes through improved coordination among federal state local law enforcement agencies prosecutor and financial regulators Renamed high intensity financial crime areas HIFCAs they may be defined geographically or may address specific industry sectors financial institutions or groups of financial institutions Current HIFCA-designated jurisdictions cover parts of California Arizona counties in Texas along the southwest border Chicago New York New Jersey Puerto Rico the U S Virgin Islands and South Florida 43 Congressional Research Service R44776 · VERSION 3 · UPDATED 11 Anti-Money Laundering An Overview for Congress Strategy Report INCSR in two volumes one on drug and chemical control and a second on money laundering and financial crimes 44 Both volumes contain country-by-country surveys of relevant foreign government policies and current implementation challenges The FAA as amended by the International Narcotics Control Corrections Act of 1994 also requires the INCSR to list jurisdictions considered to be “major money laundering” countries which are in turn divided into three categories 1 countries jurisdictions of primary concern 2 countries jurisdictions of concern and 3 other countries jurisdictions monitored 45 The INCSR also provides an annual overview of U S activities to combat international drug trafficking and financial crime The Obama Administration incorporated AML objectives in other strategy documents and White House releases including the  National Security Strategy The most recent National Security Strategy issued in February 2015 stated that economic sanctions “will remain an effective tool for imposing costs on irresponsible actors and helping to dismantle criminal and terrorist networks ”46 The National Security Strategy also aimed to work within the international standards-setting body known as the Financial Action Task Force FATF the G-20 and other international fora “to promote financial transparency and prevent the global financial system from being abused by transnational criminal and terrorist organizations to engage in or launder the proceeds of illegal activity ”  Transnational Organized Crime Strategy The first-ever national strategy to combat transnational organized crime issued in July 2011 established as one of six overarching policy objectives the goal to “protect the financial system and strategic markets against transnational organized crime ”47 The Strategy also recommended enhanced use of intelligence and information sharing among domestic and international law enforcement authorities including with respect to the Consolidated Priority Organized Targets the United States’ most wanted international drug and money laundering criminals National Drug Control Strategy The most recent National Drug Control Strategy issued in July 2014 identified the disruption of illicit financial networks related to drug trafficking including the disruption of bulk cash through seizures as a priority Action plans and other steps to address beneficial ownership A long-standing issue of contention centers on U S policies regarding beneficial ownership   44 See 22 U S C 2291 et seq U S Department of State International Narcotics and Law Enforcement Affairs Bureau International Narcotics Control Strategy Report Vol 2 “Money Laundering and Financial Crimes ” March 2016 46 White House Obama National Security Strategy February 6 2015 47 Under the priority action to protect the financial system and strategic markets against transnational organized crime the July 2011 strategy identified 10 specific actions to 1 implement a new targeted sanctions programs against transnational organized crime 2 target criminal activity in emerging and strategic markets 3 work with the private sector to reduce its role in facilitating transnational organized crime 4 develop unclassified information sharing on transnational organized crime with the private sector 5 implement the Administration’s joint strategic plan on intellectual property enforcement 6 increase domestic and international capabilities to combat cybercrime with transnational organized crime links 7 invoke USA PATRIOT Act authority to apply special measures against foreign jurisdictions institutions or transactions determined to be of primary money laundering concern 8 target foreign kleptocrats with transnational organized crime links 9 propose legislation on beneficial ownership and 10 support FATF 45 Congressional Research Service R44776 · VERSION 3 · UPDATED 12 Anti-Money Laundering An Overview for Congress transparency and shell company formation practices see also text box below on the FATF’s 2016 mutual evaluation of the United States The April 2016 leak of the so-called Panama Papers renewed U S attention to the ability of criminals to hide behind shell companies both offshore and domestically to hide the proceeds of illegal activity or to shelter funds illegally from home country taxes 48 In response the Obama Administration announced in May 2016 additional steps to strengthen financial transparency and to combat money laundering corruption and tax evasion—including the issuance of new CDD regulations discussed in a text box above 49 These steps built on previous commitments made by the Obama Administration to the G-8 and G-20 50 Agency Roles Multiple federal agencies play various roles in domestic and international cooperation to combat money laundering including in the development of AML policy oversight and regulation of AML requirements prosecution and enforcement of violators and provision of international training and technical assistance to foreign countries Offices within the Department of the Treasury As part of the Secretary of the Treasury’s overall stewardship of U S economic and financial systems and related policy the Treasury Department serves as one of the primary executive agencies responsible for administering implementation of BSA AML and developing regulations and policy to protect the integrity of the U S financial system 51 In 2004 the Treasury Department established the Office of the Under Secretary of Terrorism and Financial Intelligence TFI whose mission is to safeguard the financial system against illicit use and combat “rogue nations terrorist facilitators weapons of mass destruction WMD proliferators money launderers drug kingpins and other national security threats ”52 TFI has diplomatic policy and strategy responsibilities Overseas TFI serves to implement policy and integrate the following bureaus and offices into the larger policy apparatus 48 The Panama Papers refer to a database released by the International Consortium of Investigative Journalists that exposed documents used by a Panama law firm to set up shell companies for thousands of clients around the world For more information please see https panamapapers icij org 49 See White House Obama fact sheet on “Steps to Strengthen Financial Transparency and Combat Money Laundering Corruption and Tax Evasion ” May 5 2016 https www whitehouse gov the-pressoffice 2016 05 05 fact-sheet-obama-administration-announces-steps-strengthen-financial 50 See U S National Action Plan on Preventing the Misuse of Companies and Legal Arrangements a key deliverable of the June 2013 G-8 summit https www whitehouse gov the-press-office 2013 06 18 fact-sheet-us-national-actionplan-preventing-misuse-companies-and-legal See also the U S Action Plan to Implement the G-20 High Level Principles on Beneficial Ownership October 2015 https www whitehouse gov blog 2015 10 16 us-action-planimplement-g-20-high-level-principles-beneficial-ownership 51 In addition to the Treasury Department the Departments of Justice Homeland Security and Health and Human Services as well as the U S Postal Service all play key roles in AML investigations enforcement actions and prosecutions The Department of State plays a role in foreign policy aspects of AML efforts and in supporting foreign capacity building for AML purposes To the extent that financial intelligence contributes to national security objectives the Department of Defense and the intelligence community also contribute specialized expertise and capabilities to AML efforts 52 U S Department of the Treasury Terrorism and Financial Intelligence https www treasury gov about organizational-structure offices Pages Office-of-Terrorism-and-FinancialIntelligence aspx Congress mandated the establishment of TFI in P L 108-447 Congressional Research Service R44776 · VERSION 3 · UPDATED 13 Anti-Money Laundering An Overview for Congress      Office of Terrorist Financing and Financial Crimes TFFC Office of Intelligence and Analysis OIA Office of Foreign Assets Control OFAC Treasury Executive Office for Asset Forfeiture TEOAF Financial Crimes Enforcement Network FinCEN TFFC is the policy and outreach office within TFI It represents the United States at relevant international bodies including heading the U S delegation to the FATF and FATF-style regional bodies FSRBs It works closely with the Office of International Affairs which houses the Office of Technical Assistance OTA discussed below and Office of Domestic Finance on the formulation of AML-related policies and strategies As a member of the broader U S intelligence community OIA is responsible for TFI’s intelligence functions provides support to Treasury leadership and also integrates the Treasury Department’s financial intelligence tools across the intelligence community OIA was established by the Intelligence Authorization Act for Fiscal Year 2004 53 OFAC administers and enforces U S economic sanctions programs which include the blocking of transactions and freezing of assets under U S jurisdiction of specified foreign terrorist criminal and political entities including specially designated individuals and nation states Authorities for OFAC to designate such entities are derived from executive order and legislative statutes which include the International Emergency Economic Powers Act IEEPA National Emergencies Act United Nations Participation Act of 1945 Antiterrorism and Effective Death Penalty Act of 1996 AEDPA and Foreign Narcotics Kingpin Designation Act FinCEN is responsible for administering the BSA and conducting certain other regulatory functions It issues guidance advisories and rules on BSA implementation and maintains the federal government’s database on required reporting by financial institutions and regulated industries including suspicious activity reports SARs and currency transaction reports CTRs FinCEN also serves as the U S Financial Intelligence Unit FIU and interfaces with the private sector federal regulators and investigators and the international community on AML matters 54 While FinCEN has no criminal investigative or arrest authority it uses its data analysis to support investigations and prosecutions of financial crimes and refers possible cases to law enforcement authorities when warranted It also submits requests for information to financial institutions from law enforcement agencies conducting criminal investigations FinCEN has the authority to issue civil money penalties 53 Section 105 of P L 108-177 31 U S C 311 “A financial intelligence unit” FIU is a central national agency responsible for receiving and as permitted requesting analyzing and disseminating to the competent authorities disclosures of financial information i concerning suspected proceeds of crime and potential financing of terrorism or ii required by national legislation or regulation in order to combat money laundering and terrorism financing ” See the UNODC and the Egmont Group https www unodc org documents treaties UNCAC WorkingGroups workinggroup2 2011-August-2526 Presentations Boudewijn_Verhelst_Egmont_Group pdf 54 Congressional Research Service R44776 · VERSION 3 · UPDATED 14 Anti-Money Laundering An Overview for Congress Interagency Financial Intelligence Coordination In line with the recognition that financial information can reveal valuable insights for law enforcement FinCEN’s BSA database of reports regulations and guidance is regularly accessed by federal state and local law enforcement agencies either directly through a secure web connection or on request Law enforcement agencies and interagency entities combine BSA data with other information to gain further insight into illicit financial networks and major money laundering targets Interagency entities with financial crime-fighting missions include the Organized Crime Drug Enforcement Task Force Fusion Center International Organized Crime Intelligence and Operations Center and Bulk Cash Smuggling Center and El Paso Intelligence Center The Internal Revenue Service IRS is the largest bureau of the Treasury Department with responsibility for determining assessing and collecting internal revenue for the United States It also has responsibility for enforcing compliance with BSA requirements particularly for nonbanking financial institutions not regulated by another federal agency including money service businesses MSBs casinos and charities The IRS criminal investigation division IRSCI investigates a wide range of financial crimes including tax evasion as well as violations of AML and financial reporting statutes Federal Regulators and Oversight Bodies Federal functional regulators of financial institutions conduct oversight and examine entities in industries under their supervision for compliance with BSA AML requirements 55 Generally banking regulators examine “institutions for compliance with a broad range of laws regulations and other legal requirements to ensure their safe and sound functioning Further the regulators supervise for compliance with laws and regulations on focused topics such as anti-money laundering and consumer protection ”56 When a regulator finds BSA violations or deficiencies in AML compliance programs it may take informal or formal enforcement action 57 Federal banking agencies include the Board of Governors of the Federal Reserve System the Federal Deposit Insurance Corporation FDIC the National Credit Union Administration NCUA and the Office of the Comptroller of the Currency OCC Other federal agencies with AML regulatory responsibilities include the Securities and Exchange Commission SEC and the Commodity Futures Trading Commission CFTC The primary regulators for depository financial institutions are participants in the Federal Financial Institutions Examination Council FFIEC The FFIEC is an interagency body created in 1979 to prescribe uniform principles standards and report forms for the federal examination of financial institutions by the prudential regulators and to promote uniformity in the supervision of financial institutions 58 Non-depository regulators are also members of the National Anti-Money Laundering Group NAMLG 55 These regulators are already responsible for the safety and soundness examinations of the institutions they supervise and generally conduct BSA examinations concurrently with those routine inspections When there is cause do so however any of the regulators may carry out a special BSA examination 56 Board of Governors of the Federal Reserve System The Federal Reserve System Purposes Functions at https www federalreserve gov pf pdf pf_complete pdf 57 Informal actions typically not made public may include commitment letters signed by institution management memoranda of understanding or matters flagged for board attention in the examination reports Formal actions are made public and may include cease and desist orders formal agreements requiring the institution to take certain actions to correct deficiencies actions taken against specific officers directors or other individuals including removal and prohibition from participating in the banking industry and civil fines 58 These prudential regulators include the Board of Governors of the Federal Reserve System FRB the Federal Deposit Insurance Corporation FDIC the National Credit Union Administration NCUA the Office of the Comptroller of the Currency OCC and the Consumer Financial Protection Bureau CFPB Congressional Research Service R44776 · VERSION 3 · UPDATED 15 Anti-Money Laundering An Overview for Congress       The Federal Reserve System supervises state-chartered commercial banks that are members of the Federal Reserve System and bank holding companies including those that are financial holding companies It also has authority with respect to foreign bank branches and agencies operating in the United States and Edge Act corporations 59 The Federal Reserve conducts examinations which include BSA compliance along with other banking functions The FDIC regulates state-chartered commercial banks and state-chartered savings associations that are not members of the Federal Reserve System and examines them for AML compliance along with other requirements The OCC which is a bureau of the Treasury Department regulates and supervises nationally chartered banks and federal savings associations as well as U S branches and offices of foreign banks The OCC conducts examinations which cover among other banking functions BSA compliance The NCUA regulates federally chartered credit unions and federally insured state-chartered credit unions Most credit unions are small and considered to have limited exposure to money laundering activities However in December 2016 FinCEN imposed a civil monetary penalty against a New York-based credit union providing money-business services without updating its anti-money laundering program 60 The SEC protects investors against fraud and deceptive practices in securities markets It also has authority to examine institutions it supervises for BSA compliance including securities exchanges securities issuers investment advisers investment companies broker-dealers and various industry professionals The SEC also carries out joint examinations with self-regulatory organizations SROs including the Financial Industry Regulatory Authority FINRA and the New York Stock Exchange The CFTC protects market users and the public from fraud and abusive practices in markets for most derivatives e g commodity and financial futures options and swaps It delegates BSA examination to its designated SROs including the National Futures Association NFA Covered businesses include all registered futures commission merchants “introducing brokers ” commodity pool operators and commodity trading advisors Designated SROs monitor business practices and as appropriate take formal disciplinary actions including prohibiting firms from conducting further business Federal Prosecution and Enforcement Views on whether the U S government sufficiently enforces AML laws to deter future violators vary Some policymakers argue that certain major financial institutions are insufficiently punished for AML violations while others warn that further regulatory costs imposed on financial institutions for AML compliance could be viewed as untenable 61 Strong enforcement of AML laws and the effectiveness of money laundering deterrence have long been issues for Congress 59 See Federal Reserve Supervising and Regulating Financial Institutions and Activities https www federalreserve gov pf pdf pf_5 pdf 60 FinCEN “FinCEN Penalizes Bronx Credit Union for Failures to Manage High-Risk International Financial Activity ” press release December 15 2016 61 See U S House Financial Services Committee Too Big to Jail Inside the Obama Justice Department’s Decision Not Congressional Research Service R44776 · VERSION 3 · UPDATED 16 Anti-Money Laundering An Overview for Congress A 2016 report by the U S Government Accountability Office GAO found that from January 2009 to December 2015 federal agencies assessed roughly $5 1 billion in fines forfeitures and penalties see Figure 2 for BSA AML requirements 62 A separate 2016 analysis of AML enforcement found that penalties and fines for BSA violations had increased markedly since the 2008 financial crisis and concluded that regulators had become more aggressive in pursuing BSA violations in the wake of the crisis 63 The report found that the number and size of BSA AML penalties had grown particularly after 2012 “Nearly 90% of BSA AML enforcement actions from 2012 through 2015 included monetary penalties compared to less than half from 2002 through 2011 Penalties have grown substantially in both absolute terms and as a proportion of firm capital ”64 Figure 2 Fines Forfeitures and Penalties Collected from Financial Institutions for BSA AML Violations assessed January 2009 to December 2015 Source GAO-16-297 Recent trends also highlight authorities’ use of Deferred Prosecution Agreements DPAs and Non-Prosecution Agreements NPAs along with these fines and penalties DPAs and NPAs have been used often in conjunction with monetary penalties as alternative enforcement tools that provide an agreement by authorities to defer criminal prosecution in exchange for an acceptance of tighter ongoing scrutiny by regulators for those institutions found to be lacking in compliance with the law According to one study the number of DPAs and NPAs in 2015 more than doubled as compared to the annual average since 2000 65 to Hold Wall Street Accountable majority staff report July 11 2016 letter from Judith C Appelbaum Principal Deputy Assistant Attorney General to Senator Sherrod Brown Feb 27 2014 62 U S Government Accountability Office GAO Financial Institutions Fines Penalties and Forfeitures for Violations of Financial Crimes and Sanctions Requirements GAO 16-297 March 2016 63 Sharon Brown-Hruska Developments in Bank Secrecy Act and Anti-Money Laundering Enforcement and Litigation NERA Economic Consulting June 2016 64 Ibid 65 Cindy R Alexander and Mark A Cohen Trends in the Use of Non-Prosecution and Plea Agreements in the Settlement of Alleged Corporate Criminal Wrongdoing George Mason University School of Law Law and Economics Center April 2015 Congressional Research Service R44776 · VERSION 3 · UPDATED 17 Anti-Money Laundering An Overview for Congress Although the number of such agreements increased the study found that certain federal judges had begun challenging the practice Since the financial crisis FinCEN and other regulators have reportedly increased their focus on individual and corporate responsibility for AML compliance 66 For instance in announcing the December 2012 then-record monetary penalty on HSBC for BSA AML compliance failures the DOJ stated that HSBC had waived federal indictment and had accepted responsibility for its criminal conduct and that of its employees 67 International Training and Technical Assistance Several U S federal departments agencies and offices provide bilateral technical assistance and training on AML CFT topics to foreign counterparts The U S government also supports multilateral organizations that provide AML CFT assistance whether in the form of direct U S participation or funding According to the Department of State the U S government provided AML CFT support to more than 100 countries in 2015 both bilaterally and with other donor nations and international organizations in the form of training mentoring and other support for the full range of AML CFT stakeholders 68 Such stakeholders included supervisory law enforcement prosecutorial customs and financial intelligence unit government personnel as well as private sector entities U S agencies involved in implementing such international AML CFT support include the following      U S Department of Homeland Security DHS Includes Customs and Border Protection CBP and Immigration and Customs Enforcement’s Homeland Security Investigations ICE-HSI U S Department of Justice DOJ Includes the Drug Enforcement Administration DEA Offices within the Criminal Division including the Office of Overseas Prosecutorial Development Assistance and Training OPDAT and the Asset Forfeiture and Money Laundering Section AFMLS and the National Security Division NSD U S Department of State Includes the International Narcotics and Law Enforcement Affairs Bureau INL and Counterterrorism Bureau CT U S Department of the Treasury Includes the Financial Crimes Enforcement Network FinCEN International Revenue Service-Criminal Investigations IRSCI Office of the Comptroller of the Currency OCC and Office of Technical Assistance OTA Board of Governors of the Federal Reserve System FRB Among other initiatives the Board of Governors and the Reserve Banks of the Federal Reserve System offer training and assistance for supervisors and staff of foreign central banks and foreign bank supervisory authorities which includes courses on See Brown-Hruska which stated that “Historically financial institutions that were the subject of FinCEN or other regulators’ enforcement actions could typically consent to a penalty without admitting or denying the alleged facts By 2012 some regulators began to press firms to admit to allegations as part of settlements resolving enforcement actions ” 67 See U S Department of Justice “HSBC Holdings Plc and HSBC Bank USA N A Admit to Anti-Money Laundering and Sanctions Violations Forfeit $1 256 Billion in Deferred Prosecution Agreement ” December 11 2012 68 U S Department of State International Narcotics and Law Enforcement Affairs Bureau International Narcotics Control Strategy Report Vol 2 “Money Laundering and Financial Crimes ” March 2016 66 Congressional Research Service R44776 · VERSION 3 · UPDATED 18 Anti-Money Laundering An Overview for Congress AML CFT compliance and supervisions through the Fed’s International Training and Assistance ITA programs 69 These U S federal entities provide an array of international programming that spans the full range of AML CFT matters Illustrative programming includes DHS-CBP training workshops in detecting bulk cash smuggling ICE-HSI cross-border financial investigation training CBFIT DOJ-OPDAT and DOJ-AFMLS training on financial investigations and asset recovery State Department-managed trainings through its five International Law Enforcement Academies ILEAs and Treasury-OTA’s comprehensive support to develop internationally compliant AML CFT regimes through its Economic Crimes Team ECT DHS special agents have also been placed on temporary assignment overseas as cross-border financial investigations advisors CBFIAs and federal prosecutors have been placed overseas on long-term assignments funded by the State Department and managed by DOJ-OPDAT as resident legal advisors RLAs RLAs are located in Algeria Bangladesh Iraq Kenya Panama Senegal Turkey and the United Arab Emirates UAE with regional responsibility for UAE Bahrain Jordan Kuwait Oman Qatar Saudi Arabia and Yemen They focus on supporting host nations with the development and implementation of AML CFT legal regimes partially supported by counterterrorism funds additional RLAs are located in the Philippines Indonesia and Malaysia The State Department also funds Intermittent Legal Advisors ILAs in Colombia and Paraguay In addition the Treasury Department assigns attaches to U S overseas posts including in UAE Turkey Iraq China Belgium Egypt Qatar Pakistan Afghanistan Ukraine Mexico Russia India Saudi Arabia Brazil Singapore and Japan AML CFT technical assistance projects including bilateral and multilateral efforts have primarily been funded with foreign assistance accounts administered by the Departments of State and Treasury Projects are also funded by the U S Agency for International Development USAID U S Embassies and the U S government foreign aid agency Millennium Challenge Corporation among others U S funding for AML CFT technical assistance across all government stakeholders is not comprehensively presented in an interagency format to Congress as part of the President’s annual budget plans but some illustrative trends in funding are available for some specific accounts including technical assistance funded by Treasury’s OTA see Table 1 In the case of the State Department although foreign assistance funding for combating terrorist financing is available funding estimates for programming that addresses potentially broader AML objectives are not regularly reported to Congress see Table 2 Rough estimates indicate that AML-related programming likely ranged between $10 million and $20 million annually between FY2010 and FY2015 70 Table 1 Treasury’s OTA Technical Assistance Funding FY2010-present in US $ current millions FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 est FY2017 Request 25 25 4 27 23 6 23 5 23 5 23 5 33 5 69 See Anti-Money Laundering Examination Seminar Federal Reserve System Courses https www federalreserve gov bankinforeg ita amle htm 70 U S Department of State response to CRS based on a non-budget quality review of AML-related programming funded through International Narcotics Control and Law Enforcement INCLE Economic Support Funds ESF and Assistance for Europe Eurasia and Central Asia AEECA Congressional Research Service R44776 · VERSION 3 · UPDATED 19 Anti-Money Laundering An Overview for Congress Source U S Department of the Treasury International Programs Congressional Justification for Appropriations FY2012-FY2017 Table 2 State Department’s Foreign Assistance to Combat Terrorist Financing in US $ current millions FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 est FY2017 Request 21 20 7 17 16 1 7 1 15 15 10 Source U S Department of State response to CRS Notes This programming category specifically includes only State Department foreign assistance for combating terrorist financing that is exclusively budgeted out of the Nonproliferation Anti-Terrorism Demining and Related Programs NADR foreign assistance account Other State Department funding for technical assistance for anti-money laundering and capacity building for financial institutions more broadly defined is not included here International Framework Given the global nature of the international financial system and the transnational criminal activity that attempts to exploit it the United States and other countries have engaged in a variety of international efforts designed to improve global AML responses and build international coordination and cooperation on AML issues including through formal bilateral requests for mutual legal assistance on financial crime investigative matters In addition multiple international organizations contribute to international AML cooperation through global standard setting cross-border information sharing AML assessment and monitoring and capacity building through technical assistance Some entities such as the Financial Action Task Force FATF and the Basel Committee on Banking Supervision provide standard-setting guidance relevant to AML matters Others such as the Egmont Group of Financial Intelligence Units and the International Criminal Police Organization INTERPOL contribute to the implementation of such standards through information sharing The U N Office of Drugs and Crime UNODC the World Bank and the IMF also maintain capabilities to variously monitor and assess the status of national AML policies as well as provide technical assistance on AML capacity building priorities Other international and regional organizations including the Organization for Economic Cooperation and Development OECD the G-20 and the Organization of American States OAS have working groups and initiatives focused on various AML matters United Nations The first U N treaty to require states parties to criminalize the laundering of illicit drug profits was the 1988 U N Convention Against the Illicit Traffic in Narcotic Drugs and Psychotropic Substances The 1988 U N drug trafficking convention also committed states parties to “the widest measure of mutual legal assistance” for the investigation and prosecution of criminal offenses laid out by the treaty including drug-related money laundering Building on these foundations the 2000 U N Convention Against Transnational Organized Crime UNTOC broadened the scope of prohibited money laundering to cover the proceeds of all serious crime involving organized criminal groups The UNTOC further requires all states parties to implement a comprehensive domestic regulatory and supervisory system for banks and nonbank financial institutions—with particular emphasis on requirements akin to the BSA on customer identification recordkeeping and the reporting of suspicious transactions The UNTOC Congressional Research Service R44776 · VERSION 3 · UPDATED 20 Anti-Money Laundering An Overview for Congress also recommends the domestic implementation of measures to detect and monitor the crossborder movement of cash and other negotiable instruments The treaty also encourages bilateral regional and global cooperation for AML to include training and technical assistance on AML matters as well as extradition mutual legal assistance criminalization of corruption and asset seizure and confiscation The basic premise of the 2000 U N Convention Against Corruption UNCAC is to develop policies aimed at preventing public sector corruption and to require states parties to criminalize money laundering and implement a comprehensive domestic regulatory AML system The UNCAC goes beyond the UNTOC to require that AML regimes also cover persons providing formal or informal value transfer services e g money remitters UNCAC also requires states parties to verify customer identities including efforts to verify the identity of beneficial owners of funds and to prohibit the establishment of high risk banks particularly those that have no physical presence and that are not affiliated with a regulated financial group The United States has ratified the 1988 U N drug trafficking convention 1990 the UNTOC 2005 and the UNCAC 2006 It also ratified the International Convention for the Suppression of the Financing of Terrorism in 2002 U N Office on Drugs and Crime Established in 1997 the UNODC is mandated to provide technical assistance to Member States in their struggle to combat drugs crime and terrorism consistent with their obligations pursuant to relevant U N treaties including treaty provisions pertaining to money laundering Central to the UNODC’s effort to address AML CFT is the Global Programme Against Money Laundering Proceeds of Crime and the Financing of Terrorism GPML GPML is a key player within the U N system on AML matters and has developed model legislation consistent with international legal instruments and FATF recommendations GPML also maintains a database on national AML CFT laws and relevant contact information for inter-country assistance called the International Money Laundering Information Network IMoLIN Anti-Money Laundering International Database AMLID Through GPML UNODC supports Member States with AML CFT technical assistance in the form of advisory services workshops seminars other training platforms and in-country mentoring Various national and international organizations including the United States partner with UNODC on AML CFT technical assistance Financial Action Task Force FATF The Financial Action Task Force FATF is an intergovernmental body established in 1989 whose current mandate 2012-2020 focuses on setting global standards for the implementation of legal regulatory and operational measures for AML and other threats to the integrity of the international financial system including terrorist financing 71 As Figure 3 shows FATF is composed of a secretariat based in Paris at the headquarters of the OECD and 37 member states or jurisdictions and other observers 72 71 FATF Mandate 2012-2020 April 20 2012 According to its website The Financial Action Task Force FATF is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions which now total 37 members and observers The objectives of the FATF are to set standards and promote effective implementation of legal regulatory and operational measures for combating money laundering terrorist financing and other related threats to the integrity of the international financial system The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas See http www fatf-gafi org about 72 FATF members include 35 countries or jurisdictions and two regional organizations including in alphabetical order Argentina Australia Belgium Brazil Canada China Denmark European Commission Finland France Germany Greece Gulf Cooperation Council Hong Kong China Iceland India Ireland Italy Japan Luxembourg Malaysia Mexico Netherlands New Zealand Norway Portugal Russia Singapore South Africa South Korea Spain Sweden Switzerland Turkey United Kingdom and United States FATF country observers include Israel and Saudi Arabia Congressional Research Service R44776 · VERSION 3 · UPDATED 21 Anti-Money Laundering An Overview for Congress Figure 3 Map of FATF Members and Observer Countries Source Graphic prepared by CRS based on FATF data FATF issued a set of 40 recommendations on international standards for AML and combating the financing of terrorism most recently adopted in 2012 and updated in 2016 It collaborates with other international stakeholders to identify and follow up on national-level financial vulnerabilities particularly through periodic mutual evaluations that review participating country AML CFT legal financial and regulatory systems As of October 2016 FATF had identified 10 “high risk and non-cooperative jurisdictions ”73 FATF’s mandate document also notes that the IMF and the World Bank are providers of technical assistance and capacity building on combating money laundering terrorist financing and other related threats FATF’s work is complemented by nine FATF-style regional bodies FSRBs whose primary purpose is to promote the implementation of FATF standards see Figure 4 They play a key role in facilitating country requests for technical assistance and training and for gathering countrylevel information on money laundering typologies The nine FSRBs are   Asia Pacific Group on Money Laundering APG 74 Caribbean Financial Action Task Force CFATF FATF observer organizations include the African Development Bank Anti-Money Laundering Liaison Committee of the Franc Zone Asian Development Bank Basel Committee on Banking Supervision Egmont Group of Financial Intelligence Units European Bank for Reconstruction and Development European Central Bank Eurojust Europol Group of International Finance Centre Supervisors Inter-American Development Bank International Association of Insurance Supervisors International Monetary Fund International Organization of Securities Commissions Interpol Organization of American States Organization for Economic Cooperation and Development Organization for Security and Cooperation in Europe United Nations World Bank and World Custom Organization 73 Against North Korea FATF calls on its members and other jurisdictions to apply AML CFT “counter-measures” intended to insulate the international financial system from North Korean money laundering and terrorist financing risks Against Iran FATF calls on its members and other jurisdictions to apply enhanced due diligence measures The remaining eight countries are categorized as “other monitored jurisdictions ” Afghanistan Bosnia and Herzegovina Iraq Laos Syria Uganda Vanuatu and Yemen 74 The United States is a member of the APG Congressional Research Service R44776 · VERSION 3 · UPDATED 22 Anti-Money Laundering An Overview for Congress        Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism MONEYVAL Eurasian Group EAG Eastern and Southern Africa Anti-Money Laundering Group ESAAMLG Financial Action Task Force of Latin America GAFILAT Inter-Governmental Action Group against Money Laundering in West Africa GIABA Middle East and North Africa Financial Action Task Force MENAFATF Task Force on Money Laundering in Central Africa GABAC Figure 4 Map of FATF-Style Regional Bodies FSRBs Source Graphic prepared by CRS based on FATF data 2016 Mutual Evaluation of the United States In 2016 FATF in conjunction with the APG reviewed the effectiveness of the U S AML CFT system and its compliance with FATF’s 40 recommendations 75 The review included a three-week on-site visit in early 2016 and included scoresheet ratings for 11 measures of effectiveness and 40 measures of technical compliance Overall the mutual evaluation described the U S AML CFT framework as “well developed and robust” and as having significantly progressed since the previous mutual evaluation of the United States a decade ago Of the 11 effectiveness measures the United States received the highest marks in the areas of asset confiscation combating terrorist financing and the application of sanctions for proliferation finance The United States scored lowest with respect to its effectiveness in addressing AML CFT issues concerning legal persons and arrangements Of the 40 measures of technical compliance aligned with FATF’s 40 recommendations the United States was rated “compliant” with 9 recommendations “largely compliant” with 21 “partially complaint” with 6 and “noncompliant” with 4 75 FATF Mutual Evaluation of the United States December 2016 Sourcing for the context of the text box is attributed entirely to FATF’s 2016 U S mutual evaluation Congressional Research Service R44776 · VERSION 3 · UPDATED 23 Anti-Money Laundering An Overview for Congress The four non-compliant marks were related to three recommendations for AML CFT controls on designated nonfinancial businesses and professions DNFBPs recommendations 22 23 and 28 and one on the transparency and beneficial ownership of legal persons recommendation 24 Noted AML gaps focused on  Minimal regulatory coverage of investment advisors lawyers accountants real estate agents and certain trust and company service providers which is short of comprehensive AML CFT supervision The Residential Mortgage Lenders and Originators RMLOs sector in particular is identified as lacking a recognition of money laundering vulnerabilities in the real estate sector and their importance in addressing such vulnerabilities  Lack of timely law enforcement access to beneficial ownership information Although authorities have reportedly demonstrated their ability to acquire some beneficial ownership information they “most often resort to resource-intensive and time-consuming investigative and surveillance techniques ” Moreover the lack of readily available beneficial ownership information could have implications with respect to U S international cooperation According to FATF “U S authorities are unlikely to undertake a resourceintensive investigation to cover BO beneficial ownership information on behalf of a foreign counterpart unless the case is of significant high priority ”  The existence of “exemptions gaps and thresholds” in the AML CFT regulatory framework that “do not appear to be justified or in line with the vulnerabilities identified through the risk assessment ” limit the availability of financial intelligence information to relevant authorities and “collectively soften the deterrent value of preventive measures” applied by financial institutions in general  Lack of a uniform approach to and prioritization of AML efforts at the state level Noted areas of current change involve AML CFT supervision of money service businesses MSBs which FATF identified as “evolving” through greater coordination at the state level The mutual evaluation also reported that as part of a modernization plan the United States is seeking to increase its staff for processing mutual legal assistance and extradition requests and to improve capabilities to collect statistics on the length of time such processes take FATF also recommended that the U S AML CFT regime would benefit from incorporating a range of tax crimes as predicate offenses for money laundering and that the United States consider “legislating to introduce a general power to seize freeze property of corresponding equivalent value which may become subject to a value-based forfeiture order and to ensure that all predicate offenses include the power to forfeit instrumentalities ” Other international entities that establish global standards and best practices for financial institutions including banking regulatory and supervisory institutions incorporate FATF’s AML CFT standards Such entities include the Basel Committee the global standard-setter for prudential regulation of banks and a forum for international cooperation on banking supervisory matters its global standards include guidance on risk management and customer due diligence Another standard-setting body the Egmont Group has established guidance for national financial intelligence units FIUs Through its member network of 151 FIUs including FinCEN the Egmont Group facilitates information sharing and international cooperation on financial intelligence matters its guidance documents are interlinked with the FATF standards The Egmont Group also facilitates collaboration through personnel exchanges and training and technical assistance World Bank and International Monetary Fund Both the World Bank and IMF contribute to international AML efforts The World Bank supports such activities through research projects on illicit financial flows and national risk assessments for money laundering and terrorist financing The World Bank’s advisory package of guidance for conducting national risk assessments has been used in more than 40 countries since 2007 The World Bank and IMF also provide AML technical assistance and training As part of the IMF’s surveillance responsibilities of the international monetary system and its monitoring of member countries’ economic and financial policies the IMF has integrated evaluations consistent with FATF on AML CFT matters IMF technical assistance on AML CFT matters has been funded Congressional Research Service R44776 · VERSION 3 · UPDATED 24 Anti-Money Laundering An Overview for Congress since 2009 through a multi-donor trust fund The IMF’s AML CFT trust fund was renewed for a five-year term in May 2014 Donors France Japan Luxembourg the Netherlands Norway Qatar Saudi Arabia Switzerland and the United Kingdom have pledged more than $20 million through 2019—which has afforded the IMF to provide over $6 5 million annually in AML CFT technical assistance and training In a limited number of cases AML CFT measures have been incorporated into conditionality under Fund-supported programs Outlook for the 115th Congress The 114th Congress introduced or passed several bills pertaining to AML and funded ongoing executive branch efforts as well as holding a number of hearings exploring AML issues 76 Many of these efforts pertained to combating terrorist financing sanctions the disclosure of beneficial ownership and corruption—issues that will likely persist during the 115th Congress As the 115th Congress develops its legislative agenda a number of AML policy questions remain—including the status of efforts to address the critiques of the December 2016 FATF mutual evaluation of the United States particularly with respect to beneficial ownership transparency and the implementation of enacted legislation from the 114th Congress particularly with respect to the application of new sanctions including secondary sanctions against designated foreign persons entities and jurisdictions Drawing from past legislative activity the 115th Congress may also revisit proposals to require the executive branch to develop a roadmap for identifying key AML policy challenges and balancing AML priorities in a national strategy Although the national and international consequences of money laundering have the potential to be economically and politically significant and despite robust AML efforts in the United States challenges both new e g cyber-enabled financial crimes and emerging payment methods and old e g exploitation of cash and international trade for money laundering remain Over time the scale of global money laundering and the diversity of illicit methods to move and store illgotten proceeds through the international financial system has not diminished Gaps in legal regulatory and enforcement regimes including uneven availability of international training and technical assistance for AML purposes continue to limit the application of a globally consistent policy approach to AML Ultimately the crafting of AML policy involves an ongoing balance of implementation costs relative to the risks and consequences of money laundering—a balance affected by statutory requirements regulatory implementation financial institution compliance enforcement actions international cooperation and changing perceptions of the risk environment Some see the beginning of the 115th Congress as an opportunity to revisit the existing AML policy framework assess its effectiveness and propose regulatory and statutory changes In February 2017 for example the financial services industry association The Clearing House offered multiple proposals to significantly modify the BSA AML regime including proposals to reshape the relationship between FinCEN and other federal regulators and oversight bodies enact beneficial ownership legislation modify SAR filing and disclosure requirements and ultimately 76 See H R 2297 the Hizballah International Financing Prevention Act of 2015 HIFPA which was signed into law as P L 114-102 on December 18 2015 H R 757 the North Korea Sanctions and Policy Enhancement Act of 2016 which was signed into law as P L 114-122 on February 18 2016 S 2943 the National Defense Authorization Act for Fiscal Year 2017 which was signed into law as P L 114-328 on December 23 2016 Two bills in the 114th Congress H R 5602 and H R 5594 included provisions to extend and amend prior statutory requirements for a national strategy pertaining to AML CFT The risk of terrorists criminals and corrupt actors exploiting beneficial ownership disclosure gaps in the United States to create and use shell companies to disguise and finance their illicit activities has long been recognized as a policy issue for Congress bills have been introduced seeking to address such risks in successive Congresses since 2008 the 110th Congress Congressional Research Service R44776 · VERSION 3 · UPDATED 25 Anti-Money Laundering An Overview for Congress rebalance the distribution of financial and resource costs associated with preventing identifying and reporting on illicit financial activity 77 Other proposals may emerge as the 115th Congress continues to tackle AML policy issues Author Information Rena S Miller Specialist in Financial Economics Liana W Rosen Specialist in International Crime and Narcotics Acknowledgments This report benefitted from the research support of Gabriele Masetti former intern in the Foreign Affairs Defense and Trade Division Disclaimer This document was prepared by the Congressional Research Service CRS CRS serves as nonpartisan shared staff to congressional committees and Members of Congress It operates solely at the behest of and under the direction of Congress Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role CRS Reports as a work of the United States Government are not subject to copyright protection in the United States Any CRS Report may be reproduced and distributed in its entirety without permission from CRS However as a CRS Report may include copyrighted images or material from a third party you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material 77 The Clearing House A New Paradigm Redesigning the U S AML CFT Framework to Protect National Security and Aid Law Enforcement February 2017 Congressional Research Service R44776 · VERSION 3 · UPDATED 26