The Clearing House Publishes New Anti-Money Laundering Report

https://www.theclearinghouse.org/~/media/TCH/Documents/TCH%20WEEKLY/2017/20170216_TCH_Report_AML_CFT_Framework_Redesign.pdf


Leading experts and practitioners recommend reforms to improve AML/CFT effectiveness

Washington, D.C. – Today, the Clearing House released a report entitled A New Paradigm: Redesigning the U.S. AML/CFT Framework to Protect National Security and Aid Law Enforcement.  The paper analyzes the current effectiveness of the AML/CFT regime, identifies fundamental problems with that regime, and proposes a series of reforms to remedy them.

The report reflects conclusions reached in two closed-door symposia, in April and October 2016, that convened approximately 60 leading experts in this field.  The group included senior former and current officials from law enforcement, national security, bank regulation and domestic policy; leaders of prominent think tanks in the areas of economic policy, development, and national security; consultants and lawyers practicing in the field; FinTech CEOs; and the heads of AML/CFT at multiple major financial institutions.  The first meeting focused on problems with the current regime; the second focused on a review of potential solutions.  The conclusions on both are set forth in the report.

Said Greg Baer, President of the Clearing House Association, “Today’s report reflects a remarkable consensus on how to substantially increase the effectiveness of the AML/CFT regime.  Those participating in the effort come from a wide range of disciplines and reflect a variety of interests, but have reached a common diagnosis of the problems with the current regime and in their prescription for reform.”

Among those participating in the symposia and supporting the report are the following individuals, acting in their personal, non-institutional, capacity:

  • Gary Shiffman, CEO, Giant Oak
  • H. Rodgin Cohen, senior chairman of Sullivan & Cromwell;
  • David D. DiBari, managing partner of Clifford Chance, Washington office; 
  • James H. Freis, Jr, former Director of FinCEN; chief compliance officer, Deutsche Börse Group;
  • Aaron Klein, policy director, Center on Regulation and Markets, Brookings Institution;
  • Sharon Cohen Levin, former Chief, Money Laundering and Asset Forfeiture Unit, U.S. Attorney’s Office, Southern District of New York; partner, WilmerHale;
  • Joseph Myers, former Director, International Financial Affairs in the Office of Combating Terrorism, National Security Council; vice president, Western Union;
  • Chip Poncy, former senior Treasury official; President, Financial Integrity Network; Senior Adviser, Center on Sanctions and Illicit Finance;
  • Vijaya Ramachandran, senior fellow, Center for Global Development;
  • Elizabeth Rosenberg, senior fellow, Center for a New American Security; and
  • Juan C. Zarate, former senior Treasury official; former Deputy National Security Adviser; Chairman, Financial Integrity Network; Chairman, Center on Sanctions and Illicit Finance.

 
In addition, the Center on Sanctions and Illicit Finance (CSIF) at the Foundation for Defense of Democracies has also endorsed the report.

The report identifies eight reforms for immediate action:

·         The Department of Treasury, through its Office of Terrorism and Financial Intelligence (TFI), should take a more prominent role in coordinating AML/CFT policy across the government;

·         FinCEN should reclaim sole supervisory responsibility for large, multinational financial institutions that present complex supervisory issues;

·         Treasury/TFI/FinCEN should establish a robust and inclusive annual process to establish AML/CFT priorities;

·         Congress should enact legislation, already pending in various forms, that requires the reporting of beneficial owner information at the time of incorporation, preventing the establishment of anonymous companies;

·         Treasury TFI should strongly encourage innovation, and FinCEN should propose a safe harbor rule allowing financial institutions to innovate in an FIU “sandbox” without fear of examiner sanction;

·         Policymakers should incentivize banks to work on investigations and reporting of activity of high law enforcement or national security consequence; 

·         Policymakers should further facilitate the flow of raw data from financial institutions to law enforcement to assist with the modernization of the current AML/CFT technological paradigm;

·         Regulatory or statutory changes should be made to the safe harbor provision in the USA PATRIOT Act (Section 314(b)) to further encourage information sharing among financial institutions, and the potential use of utilities to allow for more robust analysis of data; and

·         Policymakers should enhance the legal certainty regarding the use and disclosure of SARs.