The U.S. Treasury Department’s Financial Crimes Enforcement Network sets risk-based compliance obligations of U.S. financial institutions. FinCEN directs counter-measures against the countries with the highest risk and enhanced due diligence against others.
FinCEN uses the list produced by the Financial Action Task Force. Countries not meeting the FATF’s standards for anti-money laundering and combating the financing of terrorism (AML/CFT) are put into one of four categories. Countries working to reform their AML/CFT programs to meet FATF standards can be re-categorized and ultimately removed from the list.
The FATF is an inter-governmental body formed in 1989 by the finance ministers of its member countries and jurisdictions, which now number 34. It sets and promotes standards — legal, regulatory, and operational — for combating money laundering, terrorist financing, and other threats to the integrity of the international financial system.
It describes itself a “policy-making body” that works to generate the necessary political will to bring about national legislative and regulatory reforms.
* * *
Here’s the list from the FATF’s latest public statement (February 27, 2015):
Jurisdictions subject to a FATF call on its members and other jurisdictions to apply counter-measures (subject to U.S. and international sanctions)
Democratic People’s Republic of Korea (DPRK)
Jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies (subject to FinCEN enhanced due diligence requirements)
Improving Global AML/CFT Compliance: on-going process (subject to FinCEN enhanced due diligence)
Papua New Guinea
Jurisdictions not making sufficient progress (subject to FinCEN enhanced due diligence)
Jurisdictions no longer subject to listing and monitoring (FinCEN recommends that financial institutions take the FATF’s decisions and the reasons behind the delisting into consideration when assessing risk)
* * *
Counter-measures generally consist of sanctions imposed by the United States, the U.N., and others.
Enhanced due diligence programs required by FinCEN include, at a minimum, steps to:
- Conduct enhanced scrutiny of correspondent accounts to guard against money laundering and to identify and report any suspicious transactions, in accordance with applicable law and regulation
- Determine whether the foreign bank for which the correspondent account is established or maintained in turn maintains correspondent accounts for other foreign banks that use the foreign correspondent account established or maintained by the covered financial institution and, if so, take reasonable steps to obtain information relevant to assess and mitigate money laundering risks associated with the foreign bank’s correspondent accounts for other foreign banks, including, as appropriate, the identity of those foreign banks, and
- Determine, for any correspondent account established or maintained for a foreign bank whose shares are not publicly traded, the identity of each owner of the foreign bank and the nature and extent of each owner’s ownership interest.
According to FinCEN, a financial institution must file a Suspicious Activity Report if it knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity or that a customer has otherwise engaged in activities indicative of money laundering, terrorist financing, or other violation of federal law or regulation.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.