By Kaila Hall
On May 16, 2024, the U.S. Department of the Treasury published the 2024 National Strategy for Combating Terrorist and Other Illicit Financing1 (2024 Strategy). The report addresses the key threats included in the 2024 National Money Laundering, Terrorist Financing, and Proliferation Financing Risk Assessments2 from February 2024 (2024 National Risk Assessments). This latter report identified illicit financial threats resulting from fraudulent schemes, ransomware attacks, the ongoing opioid epidemic, foreign and domestic terrorist attacks, corruption, and the exploitation of technological advancement in financial products and services.
Amid the recent rise of international conflicts and wars, the American financial system remains at risk. Terrorist organizations are implementing new fundraising methods, while drug and human traffickers are evading U.S. surveillance mechanisms, cybercriminals are conducting extensive fraud campaigns, and nation-states are utilizing ransomware and further financing weapons of mass destruction. The 2024 National Risk Assessments determined the most significant illicit finance vulnerabilities as being the misuse of cash, the misuse of financial products and services, the ease of formation of and limited information required to create legal entities, inadequate global anti-money laundering & countering the financing of terrorism (AML/CFT) regulation, supervision, and enforcement, AML/CFT compliance deficiencies, complicit professionals facilitating illicit finance, among several others.
Consequently, the 2024 Strategy seeks to eliminate the pathways that illicit actors exploit and increase enforcement mechanisms. The U.S. Treasury has four priorities and 15 supporting actions to implement between now and the 2026 Strategy. Priorities include (1) assessing and addressing legal and regulatory vulnerabilities in the U.S. AML/CFT regime, (2) promoting a risk-focused and effective AML/CFT regulatory framework for financial institutions, (3) enhancing operational effectiveness in combating illicit finance, and (4) supporting responsible technological innovation and harnessing technology to mitigate illicit finance risks.
The supporting actions include (1) implementing the Corporate Transparency Act, providing authorized access to the Beneficial Ownership Information registry, protecting data, and promoting compliance, (2) bringing greater transparency to real estate transactions, (3) assessing the need for additional action on sectors not subject to comprehensive AML/CFT measures, (4) considering updates to the regulatory requirements and supervisory framework for virtual asset activities, (5) assessing the potential need to revise recordkeeping and reporting requirements and thresholds, and (6) enhancing risk-focused supervision and enforcement. Additionally, the Treasury will (7) appropriately resource AML/CFT supervision and enforcement for certain non-bank financial institutions, (8) regularly update and communicate illicit finance risks and national AML/CFT priorities, (9) prioritize targeted measures and interagency and multilateral coordination to disrupt illicit finance activity, (10) expand and enhance public-private information sharing, (11) strengthen implementation of global AML/CFT standards, (12) implement the Treasury’s strategy to combat de-risking and improve financial inclusion, (13) support U.S. leadership in financial and payments technology, (14) encourage private sector use of technology to improve AML/CFT programs and compliance, and (15) continue to enhance use of al, data analytics, and additional technological innovations in government efforts to combat illicit finance.
More specifically, recent AML/CFT precautions include the U.S. Treasury operationalizing the Beneficial Ownership Information E-Filing System on January 1, 2024. This constituted a historic step to increase transparency.
With regard to fraud, the U.S. Treasury plans to continue to prioritize investigations, prosecutions, and convictions of fraudsters and fraud facilitators. It also will consider expanding or enhancing fraud reporting reward programs and work with non-traditional partners to identify complicit professionals. Lastly, it plans on expanding the use of administrative authorities and awareness-raising campaigns to assist the public in identifying sources of fraud for law enforcement agencies.
Concerning drug trafficking, the U.S. Treasury will consider the need for further guidance to financial institutions on how to detect financing related to precursors and equipment linked to fentanyl and other synthetic opioids. Additionally, it intends to continue to engage bilaterally with key jurisdictions, including Mexico, the PRC, and Canada.
In terms of ransomware and related money laundering, it will continue investigating, prosecuting, and otherwise disrupting ransomware and digital extortion activity by identifying and imposing consequences on cybercriminals and the money launderers that support them. It expects to take civil or criminal enforcement and regulatory actions, including sanctions-related enforcement actions, against Virtual asset service providers (VASPs) illicitly facilitating ransomware activity and money laundering.
With reference to human trafficking, the U.S. Treasury will enhance training on the financial aspects of human trafficking investigations and will leverage financial intelligence and anti-money laundering expertise to strengthen investigations and prosecutions of transnational human trafficking enterprises.
Regarding corruption, it hopes to continue to target the proceeds of foreign corruption that are used to purchase U.S. assets or that transit through the U.S. financial system. It also intends to enhance the use of anti-corruption sanctions, particularly prioritizing designations of financial facilitators and private enablers of public corruption.
Concerning international terrorism with U.S.-based supporters of Al-Qaeda, ISIS, and Iran proxies such as Hamas and Hezbollah, the Treasury will coordinate and share information with foreign partners on the financing of terrorist groups and their affiliates. It also aims to disrupt financial facilitators and supporters of international terrorism through targeted designations.
For more information on the four priorities, Annexes 1 and 2 respectively include a summary of the illicit finance threats and vulnerabilities, while Annex 3 pertains to progress on priorities and supporting actions. The 2024 National Strategy for Combating Terrorist and Other Illicit Financing be viewed here: https://home.treasury.gov/system/files/136/2024-Illicit-Finance-Strategy.pdf
The Treasury strategies on money laundering, terrorist financing, and other illicit financing are useful for the regulated community since they use these reports in determining the overall risks and then assessing their own risks and developing risk-based due diligence.
Kaila Hall is an intern at IELR. She is a rising senior at Cornell University.
Bibliography:
[1] “Treasury Announces 2024 National Illicit Finance Strategy.” U.S. Department of the Treasury, 16 May 2024, home.treasury.gov/news/press-releases/jy2346.
[2] “Treasury Publishes 2024 National Risk Assessments for Money Laundering, Terrorist Financing, and Proliferation Financing.” U.S. Department of the Treasury, 7 February 2024, home.treasury.gov/news/press-releases/jy2080.
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