The United States remains a global economic leader, driven by technological advancements, strong consumer spending, and a dynamic business environment. However, this growth has also led to an increased risk of financial crimes, such as money laundering and terrorist financing. To address these risks, compliance teams must stay informed about the latest Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations in the USA.
In this comprehensive guide, we explore the intricate US AML/CTF regulatory landscape, emphasising key regulatory bodies, requirements, recent legislative changes, and the consequences of non-compliance. We also discuss the importance of partnering with a reliable compliance solution provider, such as MemberCheck, to ensure your organisation stays ahead of the curve.
To mitigate financial crimes, the United States relies on several regulatory bodies to oversee AML/CTF regulations:
1. FinCEN (Financial Crimes Enforcement Network): Operating under the US Department of the Treasury, FinCEN is responsible for administering the Bank Secrecy Act (BSA). As the nation's Financial Intelligence Unit (FIU), FinCEN collects, analyses, and disseminates financial intelligence to law enforcement agencies.
2. OFAC (Office of Foreign Assets Control): OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security objectives. It oversees the publication of the Specially Designated Nationals (SDN) list, which compliance teams must screen against.
3. FATF (Financial Action Task Force): Although not exclusive to the USA, the FATF is an intergovernmental body that sets international AML/CTF standards. The USA is a member of FATF and implements its recommendations into national regulations.
Key requirements for AML/CTF compliance in the USA include:
• Customer Due Diligence (CDD): Financial institutions and other regulated entities must establish and maintain risk-based CDD procedures to identify and verify their customers' identities.
• Know Your Customer (KYC): KYC is part of the CDD process, requiring financial institutions to collect and verify customer information, screen against sanctions lists, and monitor transactions for suspicious activity.
• Suspicious Activity Reporting (SAR): Regulated entities must report suspicious transactions or activities to FinCEN within 30 days.
The United States has made significant strides in bolstering its AML/CTF framework, with recent legislative developments such as the Anti-Money Laundering Act of 2020. The AMLA reinforces the BSA by expanding its scope, raising penalties for non-compliance, and mandating the reporting of beneficial ownership information. The AMLA also establishes a national examination and supervision priorities framework, aimed at improving AML/CTF supervision across all federal and state regulators.
In recent years, regulatory authorities have continued to focus on enforcing AML/CTF regulations and have increasingly targeted a wider range of industries beyond traditional banking and financial services.
• Money Services Businesses (MSBs): MSBs, including money transmitters, currency exchangers, and check cashers, are subject to regulatory requirements.
• Gaming and Entertainment: Casinos and gaming establishments must implement AML/CTF controls.
• Insurance: Insurance companies, particularly those offering life insurance and annuities, must comply with AML/CTF regulations.
• Real Estate and Luxury Goods: These two sectors are considered high-risk for money laundering and terrorist financing, particularly real estate professionals, such as brokers and agents, are under increased scrutiny to detect and prevent money laundering.
• Precious Metals and Stones: Dealers in precious metals, stones, and jewels must adhere to relevant AML/CTF requirements.
• Cryptocurrency Exchanges and Virtual Asset Service Providers (VASPs): With the growing adoption of cryptocurrencies and digital assets, US regulators have started paying closer attention to VASPs, which are required to comply with all CML/CTF regulations.
Several high-profile cases of AML/CTF non-compliance have emerged in recent years, resulting in severe penalties and reputational damage:
1. Danske Bank's Estonia Branch (2019): Danske Bank, a leading Danish financial institution, faced a massive money laundering scandal involving its Estonia branch. Between 2007 and 2016, an estimated $230 billion of suspicious transactions flowed through the branch, with a significant portion linked to Russian entities. Danske Bank's management failed to detect and investigate these transactions, leading to substantial reputational damage and regulatory scrutiny. In 2020, the U.S. Department of Justice (DOJ) initiated a criminal investigation into the bank's AML/CTF compliance failures.
2. Standard Chartered Bank (2020): Standard Chartered Bank, a British multinational banking and financial services company, agreed to pay over $1 billion in fines to U.S. and UK regulators in 2020 for violations of AML/CTF laws and sanctions. The bank was accused of processing thousands of transactions linked to Iran, Sudan, Burma, and other sanctioned countries, and failing to implement adequate AML/CTF controls to detect and report these transactions. The enforcement action highlighted the importance of adhering to international sanctions and maintaining an effective AML/CTF compliance program.
3. Interactive Brokers LLC (2021): The U.S. Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), and the Commodity Futures Trading Commission (CFTC) announced that Interactive Brokers LLC, an electronic brokerage firm, agreed to pay $38 million in penalties to settle charges over multiple AML/CTF compliance failures. The regulators found that the firm failed to implement effective AML policies and procedures, inadequately monitored and reported suspicious transactions, and failed to properly verify the identities of some customers in its Customer Identification Program (CIP) between 2013 and 2019.
4. Societe Generale (July 2022): Societe Generale, a French multinational bank, reached a settlement with the New York State Department of Financial Services (NYDFS) over AML/CTF compliance failures in its New York branch. The bank agreed to pay a $420,000 penalty for shortcomings in its transaction monitoring and SAR processes. The deficiencies included a lack of adequate procedures for identifying high-risk transactions and customers, as well as insufficient staffing and resources dedicated to its AML/CTF compliance program.
These cases emphasise the importance of maintaining robust AML/CTF compliance programs and the potential consequences for organisations that fail to meet regulatory expectations.
As the regulatory environment in the USA evolves, compliance teams must stay vigilant and adapt to new requirements. Partnering with a reliable compliance solution provider, such as MemberCheck, can significantly enhance your organisation's AML/CTF compliance efforts.
MemberCheck offers a comprehensive suite of services, including:
• Sanctions and PEP Screening: Our advanced screening solution checks your customers against global sanctions, Politically Exposed Persons (PEP), and other high-risk lists.
• Ongoing Monitoring: Stay informed about changes in your customers' risk profiles with our continuous monitoring service.
• Enhanced Due Diligence (EDD): In high-risk scenarios, MemberCheck can provide EDD services, including in-depth background investigations and analysis.
By leveraging MemberCheck's expertise and innovative solutions, your organisation can navigate the complex AML/CTF landscape in the USA with confidence and ease.
Ensuring AML/CTF compliance in the United States is a critical responsibility for organisations across various industries. By staying informed about key regulatory bodies, requirements, recent legislative changes, and high-profile non-compliance cases, compliance professionals can better understand the complex landscape and implement effective risk mitigation strategies.
Partner with a trusted compliance solution provider like MemberCheck to enhance your organisation's AML/CTF compliance program and protect your business from financial and reputational risks.