FinCEN Releases AML/CTF Priorities: Implications for Community Financial Institutions

Terri Luttrell, CAMS-Audit
July 16, 2021
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FinCEN Releases 8 AML/CFT Priorities

These priorities were published June 30, 2021, highlighting several areas of heightened risk for the U.S. financial system.

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As required by the Anti-Money Laundering Act of 2020 (AMLA), the Financial Crimes Enforcement Network (FinCEN) published its first list of priorities for anti-money laundering and countering the financing of terrorism (AML/CTF) policy (Priorities). The AMLA requirement states that FinCEN must establish priorities within 180 days of passing the AMLA. These priorities were published June 30, 2021, highlighting several areas of heightened risk for the U.S. financial system.

The FinCEN priorities somewhat mirror the Financial Action Task Force (FATF)  expanded guidance in several critical areas of AML/CFT global concerns, also released on June 30, 2021. FATF is the global watchdog for AML/CFT activity, and it is important to note that the United States shows full support in global efforts by their recent priorities release. The eight Priorities, in no specific order, are as follows:

  • Corruption
  • Cybercrime, including relevant cybersecurity and virtual currency considerations
  • Foreign and domestic terrorist financing
  • Fraud
  • Transnational criminal organization activity
  • Drug trafficking organization activity
  • Human trafficking and human smuggling
  • Proliferation financing

These Priorities hold no surprises, as most have been addressed in numerous FinCEN advisories. While these are general today, the AMLA requires that regulations be written around each Priority, as appropriate.

How to prepare

What should financial institutions do in response to the AML/CTF priorities

Currently, the accompanying regulations have not been written, so what should community financial institutions take away from these priorities now? Community financial institutions generally have a much lower risk profile than larger U.S. banks and credit unions, and they may believe that these serious AML/CFT concerns will not affect their communities. Community financial institutions have more frequently become targets of these illicit transactions, as larger banks commonly have more sophisticated monitoring systems for detecting and reporting suspicious activity. Bad actors assume the smaller institutions are an easier means by which to launder illicit funds. Given the AMLA emphasis and the Priorities release, it may be time for community financial institutions to rethink the risks of these more serious crimes and keep criminals at bay.

There are many steps community banks and credit unions can take to stop these illicit funds from flowing through our U.S. financial system. Federal regulators will be examining each institution on a risk-based approach for each of the Priorities, so taking a proactive approach will show the examiners that the Priorities are understood and are taken seriously. 

Although not required under the AMLA, FinCEN and the federal banking agencies have stated that they plan to revise the Bank Secrecy Act to reflect guidance for the Priorities. FinCEN has been clear that financial institutions are not required to make changes to their AML programs based solely on the Priorities. Until regulations have been released and go into effect, regulatory expectations remain unclear. As previously stated, AMLA requires that regulations be written within 180 days of the Priorities release, which is right around the corner.

Stay up-to-date on the latest FinCEN priorities.
Read Part II: Human Trafficking and Human Smuggling.
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Now that the industry has been notified on the AML/CTF priorities that should be assessed in a financial institution’s BSA program, covered institutions should expect to be evaluated on their consideration of the Priorities as part of their overall BSA compliance program. Remember, the AMLA states that financial institutions’ AML/CTF programs should be risk-based and that valuable resources should be directed toward higher-risk areas of the institution.  Not all risk profiles are equal, but regardless, each Priority should be assessed. Regulators will expect that each Priority has been incorporated into the institution’s policies and procedures.

There is no doubt that the Priorities are broad, as regulations have yet to be written. FinCEN has released guidance on many of the Priorities with typologies and red flags that institutions should use for suspicious activity detection. Many of those likely are already covered, such as human trafficking and terrorist financing, but others, such as corruption and proliferation financing, may require expanded assessment. Starting now will give institutions a leg up with the guidance is released by the end of 2021.  

Consider taking these steps now to ensure preparedness, starting with a risk assessment and a few of the pillars of BSA:

  • Risk Assessment: If not already addressed, assess each Priority in your enterprise-wide risk assessment. Thoroughly analyze and document the residual risk of each.
  • Internal Controls: Ensure that your policies and procedures address each of the Priorities. While the Priorities are broad in nature, FinCEN has previously released advisories and/or guidance around most of them. Incorporate each FinCEN release into your procedures.
  • Customer Due Diligence: Onboarding documents should include any early detection method of identifying higher-risk customers. Ongoing monitoring and enhanced due diligence should be performed on any fitting a Priority profile, using a risk-based approach as supported by your risk assessment.
  • Training: Ensure that front line and BSA staff understand the Priorities and typologies and red flags of each. Understand what your risk is and what you are looking for.
  • Independent Testing: It never hurts to have your internal audit or external third-party auditor review your program for the Priorities. If there are any deficiencies, correct them now.
Looking ahead

What's Next for FinCEN Priorities?

The publication of the Priorities has been all the buzz in the industry, mostly with a “what’s new” attitude. However, FinCEN has been on a fast track to satisfy the requirements of the AMLA by their prescribed timeframes. The “what’s new” will be known by the end of the year when guidance is due to be released. This will be the first significant change to BSA since the USA PATRIOT Act. Being proactive will prepare financial institutions for implementing anticipated guidance into their AML programs.

The AMLA requires FinCEN to update the Priorities at least once every four years to account for new and emerging threats to the U.S. financial system and national security. Historically, BSA has been criticized for being stagnant while criminals find new and innovative ways of moving illicit funds. It appears change will be ongoing, and these first Priorities are a good place to get BSA Program general enhancement processes in place before regulations are finalized. Financial institutions will be positioned to quickly reevaluate existing risk assessments, policies, and procedures for any additional requirements released in the regulations.

Check out FinCEN Priorities Part II: Human Trafficking and Human Smuggling.

About the Author

Terri Luttrell, CAMS-Audit

Compliance and Engagement Director
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size.

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