The Treasury Department’s Financial Crimes Enforcement Network, typically referred to as FinCEN, has in recent months amped up efforts to stop money laundering.
FinCEN’s latest proposals are designed to close loopholes that officials say foreign and domestic criminals use to launder money through U.S. financial sectors. This week, the changes got support from Capitol Hill and beyond.
Seven U.S. Senators sent a letter to Treasury Secretary Janet Yellen in support of FinCEN’s proposed rule to require investment advisers to abide by anti-money laundering (AML) rules similar to what already is required of banks.
Meanwhile, the Financial Accountability and Corporate Transparency (FACT) Coalition submitted formal public comments in support of closing not only the private investment markets’ loopholes, but also those that provide access to the U.S. residential real estate sector.
Support from Democratic Senators: The Upper Chamber lawmakers, led by Sen. Jack Reed (D-Rhode Island), lauded the proposed move to include investment advisers in the definition of financial institution in the Bank Secrecy Act (BSA). This characterization, the Senators noted, would require advisers to maintain anti-money laundering programs, report suspicious activity to the government, file currency transaction reports, and keep records related to the transmittal of funds.
In addition to helping regulators crack down on money laundering and sanctions evasion, the Senators’ letter said the change “would also protect our Nation’s financial system from abuse by sophisticated criminals, oligarchs, and our adversaries and strategic competitors.”
The lack of standardized AML requirements has allowed bad actors to seek out an adviser that will turn a blind eye to the ultimate source of the money they are managing, wrote the Senators.
“The Treasury Department also found that investment advisers ‘have served as an entry point into the U.S. market for illicit proceeds associated with foreign corruption, fraud, and tax evasion’ in large part due to the ‘lack of comprehensive AML/CFT [Counter-Terrorism Financing] regulation,'” according to the letter, which was signed by Reed and his Democratic colleagues Sens. Dick Durbin of Illinois, Sherrod Brown of Ohio, Mark Warner of Virginia, Sheldon Whitehouse of Rhode Island, Elizabeth Warren of Massachusetts, and Ron Wyden of Oregon, who also is chair of the SFCC.
FACT supports AML expansion: In expressing its support for the Treasury/FinCEN proposals, the FACT Coalition pointed to “the roughly $50 trillion U.S. real estate and $130 trillion investment fund sectors” that the groups says have for decades been largely excluded from anti-money laundering requirements, despite dwarfing the commercial banking sector and other types of financial institutions regulated under the BSA.
That lack of regulation, has made the United States a favorite locale for money launderers, according to FACT, a Washington, D.C.-based non-partisan alliance of more than 100 state, national, and international organizations supporting policies to combat corrupt financial practices.
The proposed new rules could change that.
“After decades, the days of the U.S. being one of the easiest places to hide dirty money may be finally coming to an end. Treasury must now finish the job by releasing strong final rules in line with recommendations from anti-money laundering experts and civil society,” said Ian Gary, executive director of the FACT Coalition.
Joining the Senators and FACT Coalition in supporting the proposed AML regulations, Treasury’s efforts also have been praised by affordable housing, national security, and anti-corruption groups.
Tax Felon Friday: Money laundering generally refers to financial transactions in which criminals, including terrorist organizations, attempt to disguise the proceeds, sources, or nature of their illicit activities.
Since money laundering facilitates a broad range of serious underlying criminal offenses and ultimately threatens the integrity of the financial system, the U.S. Department of the Treasury has a specific office to combat the criminal activity in the United States and abroad.
The Office of Terrorism and Financial Intelligence (TFI) utilizes Treasury’s myriad assets — including a diverse range of legal authorities, core financial expertise, operational resources, and expansive relationships with the private sector, and interagency and international communities — to identify and attack money laundering vulnerabilities and networks across the domestic and international financial systems.”
Investigating money laundering and BSA violations also are part of the job conducted by the Internal Revenue Service’s Criminal Investigation (CI) unit. Since it’s a complex crime involving intricate details, often involving numerous financial transactions and financial outlets throughout the world, CI employs financial investigators with expertise to follow the money trail.
When those investigations produce charges and/or convictions and sentencings, you can read about them in the ol’ blog’s regular Tax Felon Friday feature. In the meantime, if you want to catch up on all sorts of tax miscreants, the ol’ blogs’ special Tax Felon Friday page is a good place to start.
And if you want more tax crime posts, notably those that were published long before I gave them a special end-of-week feature, you can peruse, what else, the tax crimes category. You’ll find this post at the top of that collection right now, so just scroll down for more.
You also might find these items of interest:
- Guy Ficco will become new IRS CI chief on April 1
- IRS investigators identify $37 billion in tax & financial crimes
- Texas man charged in apparent first-ever criminal crypto capital gains tax case
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