Anti-Money Laundering: An Overview for Congress
Released: 2017-03-01T00:00:00

Introduction

Money laundering is a term generally associated with various types of financial transactions that are conducted by criminals to conceal the location, ownership, source, nature, or control of illicit proceeds. In the process, illicit proceeds are made virtually unrecognizable from proceeds derived from legitimate sources and, thus, are usable within the national and international financial system. Money laundering is not a new problem and efforts to stem such activity remain a global policy concern.

Money l aundering occurs in three stages, which, in practice, may involve additional complexity.

The first stage is "placement" and involves the introduction of illicit funds into the financial system. The second stage involves "layering," whereby illicitly placed funds undergo a series of processes to conceal their true source and ownership. The third stage is "integration," at which point illicit funds become indistinguishable from legitimately obtained funds and flow undetected through the financial system.

Anti-money laundering (AML) policies are chiefly governed by national laws and regulations that establish the parameters of legal financial activity and the responsibilities of financial institutions and related sectors to comply with AML requirements. In the United States, a robust policy apparatus is in place to implement national laws through financial regulations, enforcement actions including prosecutions, and targeted sanctions. The U.S. government also supports the improvement of foreign government legal regimes and technical capacity for AML. International treaty instruments that address crime provide some tools to encourage international cooperation on financial crime matters. Several international institutions provide standard-setting guidance and maintain capabilities to monitor and assess the status of national AML policies. Multilateral institutions and donor nations also provide training and technical assistance to improve AML capabilities.

Halting the introduction and circulation of criminally generated proceeds in the financial system, and, ultimately, depriving criminals from using illicit wealth remains a challenge. Despite the existence of long-standing domestic regulatory and enforcement mechanisms, as well as international commitments and guidance on best practices, policymakers are challenged to identify and address policy gaps and new laundering methods that criminals continue to exploit. Moreover, policymakers also may attempt to balance AML efforts with principles of financial inclusion, including providing access to financial services in developing countries, and avoiding unnecessary administrative and compliance burdens being placed on the public and private sectors.

Scope of the Problem

The scope of money laundering as a global problem is often framed in terms of the volume of illegal transactions, breadth of geographic concerns, and varied consequences resulting from such activity. Money laundering is a difficult phenomenon to accurately measure. In 1998, the International Monetary Fund (IMF) released a "consensus range" estimate of money laundering transactions totaling some 2%-5% of global gross domestic product (GDP). Based on 2009 data, the United Nations (U.N.) reviewed in 2011 existing national and international studies on money laundering and global crime proceeds to conclude that the scope of money laundering likely remained within the bounds of the IMF's rough estimate: approximately 2.7% of global GDP, or $1.6 trillion.

Due to its global dominance, the U.S. dollar generates trillions of dollars daily in transactions through U.S. financial institutions, which in turn exposes the U.S. financial system to potential money laundering activity and cross-border illicit financial flows. The U.N. report further estimated that the United States, in 2010, likely generated some $300 billion in illicit proceeds (excluding tax evasion), or roughly 2% of U.S. GDP. In 2015, the U.S. Department of the Treasury confirmed that the U.N.'s estimates are "comparable to U.S. estimates." As in the United States, international surveys indicate that the most significant sources of illicit proceeds are generated through white collar crime (i.e., fraud, identity theft, and tax evasion) and organized crime, particularly drug trafficking. Smaller sums, which are nevertheless significant for political and security reasons, are associated with public corruption and international terrorism.

In seeking to clean dirty money, launderers wield a wide range of methods to conceal from authorities the true origins, ownership, and volume of illicit proceeds. Particularly attractive are methods that preserve anonymity (e.g., use and movement of cash), avoid AML-related recordkeeping and reporting requirements (e.g., structuring bank deposit and withdrawal), and involve techniques that are hard for authorities to detect (e.g., trade-based money laundering). Money laundering may involve the use of complicit individuals (e.g., nominees, corrupt officials, banking insiders, front company business owners) and illegal financial service providers (e.g., unregistered money services businesses).

Money laundering may also involve the exploitation of legal off-shore corporate structures that obscure beneficial ownership (e.g., shell companies) and permissive foreign jurisdictions, including those accessible by correspondent banking relationships and business sectors with potentially lax AML controls. "Beneficial owner" refers to the natural person who, directly or indirectly, controls or manages a legal entity and its assets. According to the Financial Action Task Force (FATF), an international AML standard-setting body, the lack of available information on the legal and beneficial ownership of corporate vehicles increases their vulnerability to exploitation for the purposes of laundering illicit proceeds.

The Treasury Department describes money laundering as "a necessary consequence of almost all profit generating crimes and can occur almost anywhere in the world." As a global issue, the effectiveness of international AML efforts is often described as dependent on the international community's weakest links: countries or jurisdictions that fail to establish appropriate AML safeguards. Unchecked money laundering can have global consequences; it can:

Undermine the integrity of the international financial system, reduce consumer confidence in the financial system, and damage the reputation of financial regulatory bodies. Introduce economic distortions that affect economic growth, international trade, business competitiveness, money demand, capital flows, foreign investments, exchange rates, and securities markets. Violate border and customs controls through the facilitation of bulk cash smuggling and trade-based laundering methods that evade duties, tariffs, and taxes—legitimate sources of government revenue that become unavailable for public expenditure. Contribute to and exacerbate state fragility by rewarding illicit behavior at the expense of transparency, good governance, the rule of law, and accountability of public and private institutions. Enable criminals to sustain their networks and realize profits generated by their illicit activities, including political corruption. Facilitate the financing of terrorism.

Anti-Money Laundering Policy Overview

U.S. Legal Framework

In the United States, the legislative foundation for domestic AML originated in 1970 with the Bank Secrecy Act (BSA) of 1970 and its major component, the Currency and Foreign Transaction Reporting Act. Deriving from an emerging recognition that financial transaction records have a "high degree of usefulness in criminal, tax, or regulatory investigations or proceedings," the legislation authorized the Secretary of the Treasury to require financial institutions to establish and adhere to certain AML practices. Amendments to the BSA and related provisions in the 1980s and 1990s expanded AML policy tools available to combat crime, particularly drug trafficking, and prevent criminals from laundering their illicitly derived profits.

Key elements to the BSA's AML legal framework, which are codified in Titles 12 (Banks and Banking) and 31 (Money and Finance) of the U.S. Code, include requirements for reporting, customer identification and due diligence, recordkeeping, and the establishment and maintenance of BSA/AML compliance programs. Bank examiners are required to probe banking entities on the effectiveness of AML policies and procedures. Substantive criminal statutes in Titles 31 and 18 (Crimes and Criminal Procedures) of the U.S. Code prohibit money laundering and related activities and establish civil penalties and forfeiture provisions (see text box below on enforcement actions). The establishment of a "follow the money" approach among federal law enforcement agencies in pursuing predicate offense investigations has contributed to, on average, 1,200 money laundering-related convictions annually. Moreover, federal authorities apply administrative forfeiture, non-conviction based forfeiture, and criminal forfeiture tools to confiscate assets, with more than $4.4 billion in assets confiscated in 2014.

In response to the terrorist attacks on the U.S. homeland on September 11, 2001, Congress expanded the BSA's AML policy framework to incorporate additional provisions to combat the financing of terrorism (CFT). Legislation following the September 11 attacks, including Title III of the USA PATRIOT Act of 2001, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, provided the executive branch with greater authority and additional tools to counter the convergence of illicit threats, including the financial dimensions of organized crime, corruption, and terrorism.

Reporting Requirements

The BSA's AML policy framework is premised on the effective implementation, primarily by financial institutions, of suspicious activity monitoring systems. The accurate, timely, and complete reporting of suspicious activity to the Treasury Department ensures that situations that may warrant further investigation are flagged for law enforcement authorities. Other reports are variously required to be submitted by individuals transporting large amounts of cash internationally, persons with large foreign financial interests, and nonfinancial entities conducting large cash transactions. Other reporting requirements are unique to specific countries, jurisdictions, or situations. Among such reporting requirements are the following:

Customer Identification and Due Diligence Requirements

FinCEN has issued regulations requiring various types of financial institutions to establish anti-money laundering programs. Such regulations require a financial institution to set internal policies, procedures, and processes for customer identification and due diligence, along with other requirements. FinCEN, for example, requires banks to have a customer identification program, including the verification of account holders' name and address. Implementing regulations specify that before opening a new account, banks must also obtain account holders' date of birth and either a taxpayer identification number for U.S. persons or a comparable government-issued identifying document for non-U.S. persons. Beyond customer identification and verification, regulators examine the appropriateness and comprehensiveness of financial institutions' customer due diligence (CDD) efforts. CDD includes assessing customer risk and conducting enhanced due diligence (EDD) on customers that pose greater risks and, in turn, greater money laundering exposure to banks.

Minimum standards for anti-money laundering programs for banks are found in 31 C.F.R. 1010.610 regarding due diligence programs for correspondent accounts for foreign financial institutions, and in 31 C.F.R. 1010.620, regarding due diligence programs for private banking accounts. These are supplemented by guidance and regulations issued by the federal banking regulators. In addition to recordkeeping requirements, FinCEN also requires domestic financial institutions and agencies to obtain and retain additional customer information associated with targeted jurisdictions, financial institutions, international transactions, or types of accounts of primary money laundering concern—including information relating to beneficial ownership, certain payable-through accounts, and certain correspondent accounts.

Recordkeeping Requirements

In addition to required reporting and customer identification requirements, financial institutions are required to maintain certain financial records, often for at least five years. Such recordkeeping requirements are designed to assist authorities during an investigation and to assist financial institutions, as part of their AML compliance programs, in revealing patterns of unusual activity. The system in place to preserve such records is examined by financial regulators. Basic recordkeeping requirements were established by the BSA in 1970 and expanded over time. Records include customer identification material, as well as explanations of the methods used to verify customer identification. Records also include, but are not limited to, account statements; checks and deposits in excess of $100; international transactions over $10,000; purchase of monetary instruments (e.g., bank checks or drafts, cashier's checks, money orders, and traveler's checks) of at least $3,000; funds transfers of at least $3,000; and actions taken in response to U.S. economic sanctions programs, including blocked assets or funds and rejected transactions.

Sanctions Compliance

The United States often imposes economic sanctions in response to threats to the nation's security, foreign policy, or economy. Many of the existing financial sanctions programs are based on the International Emergency Economic Powers Act (IEEPA; 50 U.S.C. 1701 et seq.), which authorizes the President, upon declaration of a national emergency (pursuant to authorities stated in the National Emergencies Act; 50 U.S.C. 1601 et seq.) with respect to an "unusual and extraordinary threat which has its source in whole or in part outside the United States," to investigate, regulate, or prohibit a variety of asset and property transactions, subject to U.S. jurisdiction. The Office of Foreign Assets Control (OFAC) in the Treasury Department administers and enforces IEEPA-based financial sanctions programs, as well as other authorized sanctions programs, against foreign countries, political regimes, terrorists, narcotics traffickers, transnational organized criminals, and proliferators of weapons of mass destruction. Implementing regulations require financial institutions to comply with sanctions provisions that variously prohibit financial transactions and freeze or block assets and property under U.S. jurisdiction associated with designated individuals and entities. Regulators examine banks for compliance with sanctions provisions; violations are subject to potential civil and criminal penalties.

National Strategies

In the past, Congress has required the President to develop national strategies for combating money laundering and related financial crimes. Pursuant to the Money Laundering and Financial Crimes Strategy Act of 1998, as amended, the Administrations of Bill Clinton and George W. Bush transmitted national strategies on money laundering to Congress in 1999, 2000, 2001, 2002, 2003, 2005, and 2007 (the only years for which such strategy reports were required by Congress). In 2006, the Bush Administration also released a U.S. Money Laundering Threat Assessment. In 2015, the Obama Administration released a National Money Laundering Risk Assessment and a National Terrorist Financing Risk Assessment.

Pursuant to Chapter 8 of Part I of the Foreign Assistance Act of 1961 (FAA, as amended by the International Narcotics Control Act of 1992) and the Foreign Relations Authorization Act, Fiscal Year 2003 ( P.L. 107-228 ), the U.S. Department of State's Bureau of International Narcotics Control and Law Enforcement Affairs (INL) annually issues the International Narcotics Control Strategy Report (INCSR) in two volumes: one on drug and chemical control and a second on money laundering and financial crimes. Both volumes contain country-by-country surveys of relevant foreign government policies and current implementation challenges. The FAA (as amended by the International Narcotics Control Corrections Act of 1994) also requires the INCSR to list jurisdictions considered to be "major money laundering" countries, which are, in turn, divided into three categories: (1) countries/jurisdictions of primary concern; (2) countries/jurisdictions of concern; and (3) other countries/jurisdictions monitored. The INCSR also provides an annual overview of U.S. activities to combat international drug trafficking and financial crime.

The Obama Administration incorporated AML objectives in other strategy documents and White House releases, including the

National Security Strategy. The most recent National Security Strategy, issued in February 2015, stated that economic sanctions "will remain an effective tool for imposing costs on irresponsible actors and helping to dismantle criminal and terrorist networks." The National Security Strategy also aimed to work within the international standards-setting body known as the Financial Action Task Force (FATF), the G-20, and other international fora "to promote financial transparency and prevent the global financial system from being abused by transnational criminal and terrorist organizations to engage in, or launder the proceeds of illegal activity." Transnational Organized Crime Strategy. The first-ever national strategy to combat transnational organized crime, issued in July 2011, established as one of six overarching policy objectives the goal to "protect the financial system and strategic markets against transnational organized crime." The Strategy also recommended enhanced use of intelligence and information sharing among domestic and international law enforcement authorities, including with respect to the Consolidated Priority Organized Targets, the United States' most wanted international drug and money laundering criminals. National Drug Control Strategy. The most recent National Drug Control Strategy, issued in July 2014, identified the disruption of illicit financial networks related to drug trafficking, including the disruption of bulk cash through seizures, as a priority. Action plans and other steps to address beneficial ownership. A long-standing issue of contention centers on U.S. policies regarding beneficial ownership transparency and shell company formation practices (see also text box, below, on the FATF's 2016 mutual evaluation of the United States). The April 2016 leak of the so-called Panama Papers renewed U.S. attention to the ability of criminals to hide behind shell companies (both offshore and domestically) to hide the proceeds of illegal activity or to shelter funds illegally from home country taxes. In response, the Obama Administration announced in May 2016 additional steps to strengthen financial transparency and to combat money laundering, corruption, and tax evasion—including the issuance of new CDD regulations, discussed in a text box above. These steps built on previous commitments made by the Obama Administration to the G-8 and G-20.

Agency Roles

Multiple federal agencies play various roles in domestic and international cooperation to combat money laundering, including in the development of AML policy, oversight and regulation of AML requirements, prosecution and enforcement of violators, and provision of international training and technical assistance to foreign countries.

Offices within the Department of the Treasury

As part of the Secretary of the Treasury's overall stewardship of U.S. economic and financial systems and related policy, the Treasury Department serves as one of the primary executive agencies responsible for administering implementation of BSA/AML and developing regulations and policy to protect the integrity of the U.S. financial system. In 2004, the Treasury Department established the Office of the Under Secretary of Terrorism and Financial Intelligence (TFI), whose mission is to safeguard the financial system against illicit use and combat "rogue nations, terrorist facilitators, weapons of mass destruction (WMD) proliferators, money launderers, drug kingpins, and other national security threats." TFI has diplomatic, policy, and strategy responsibilities. Overseas, TFI serves to implement policy and integrate the following bureaus and offices into the larger policy apparatus:

Office of Terrorist Financing and Financial Crimes (TFFC) Office of Intelligence and Analysis (OIA) Office of Foreign Assets Control (OFAC) Treasury Executive Office for Asset Forfeiture (TEOAF) Financial Crimes Enforcement Network (FinCEN)

TFFC is the policy and outreach office within TFI. It represents the United States at relevant international bodies, including heading the U.S. delegation to the FATF and FATF-style regional bodies (FSRBs). It works closely with the Office of International Affairs, which houses the Office of Technical Assistance (OTA, discussed below) and Office of Domestic Finance on the formulation of AML-related policies and strategies.

As a member of the broader U.S. intelligence community, OIA is responsible for TFI's intelligence functions, provides support to Treasury leadership, and also integrates the Treasury Department's financial intelligence tools across the intelligence community. OIA was established by the Intelligence Authorization Act for Fiscal Year 2004.

OFAC administers and enforces U.S. economic sanctions programs, which include the blocking of transactions and freezing of assets under U.S. jurisdiction of specified foreign terrorist, criminal, and political entities, including specially designated individuals and nation states. Authorities for OFAC to designate such entities are derived from executive order and legislative statutes, which include the International Emergency Economic Powers Act (IEEPA), National Emergencies Act, United Nations Participation Act of 1945, Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), and Foreign Narcotics Kingpin Designation Act.

FinCEN is responsible for administering the BSA and conducting certain other regulatory functions. It issues guidance, advisories, and rules on BSA implementation and maintains the federal government's database on required reporting by financial institutions and regulated industries, including suspicious activity reports (SARs) and currency transaction reports (CTRs). FinCEN also serves as the U.S. Financial Intelligence Unit (FIU) and interfaces with the private sector, federal regulators and investigators, and the international community on AML matters. While FinCEN has no criminal investigative or arrest authority, it uses its data analysis to support investigations and prosecutions of financial crimes, and refers possible cases to law enforcement authorities when warranted. It also submits requests for information to financial institutions from law enforcement agencies conducting criminal investigations. FinCEN has the authority to issue civil money penalties.

The Internal Revenue Service (IRS) is the largest bureau of the Treasury Department, with responsibility for determining, assessing, and collecting internal revenue for the United States. It also has responsibility for enforcing compliance with BSA requirements, particularly for nonbanking financial institutions not regulated by another federal agency, including money service businesses (MSBs), casinos, and charities. The IRS criminal investigation division (IRS-CI) investigates a wide range of financial crimes, including tax evasion, as well as violations of AML and financial reporting statutes.

Federal Regulators and Oversight Bodies

Federal functional regulators of financial institutions conduct oversight and examine entities in industries under their supervision for compliance with BSA/AML requirements. Generally, banking regulators examine "institutions for compliance with a broad range of laws, regulations, and other legal requirements to ensure their safe and sound functioning. Further, [the regulators] supervise for compliance with laws and regulations on focused topics, such as anti-money laundering and consumer protection." When a regulator finds BSA violations or deficiencies in AML compliance programs it may take informal or formal enforcement action. Federal banking agencies include the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC). Other federal agencies with AML regulatory responsibilities include the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The primary regulators for depository financial institutions are participants in the Federal Financial Institutions Examination Council (FFIEC). The FFIEC is an interagency body created in 1979 to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the prudential regulators, and to promote uniformity in the supervision of financial institutions. Non-depository regulators are also members of the National Anti-Money Laundering Group (NAMLG).

The Federal Reserve System supervises state-chartered commercial banks that are members of the Federal Reserve System and bank holding companies, including those that are financial holding companies. It also has authority with respect to foreign bank branches and agencies operating in the United States and Edge Act corporations. The Federal Reserve conducts examinations which include BSA compliance, along with other banking functions. The FDIC regulates state-chartered commercial banks and state-chartered savings associations that are not members of the Federal Reserve System and examines them for AML compliance along with other requirements. The OCC, which is a bureau of the Treasury Department, regulates and supervises nationally chartered banks and federal savings associations, as well as U.S. branches and offices of foreign banks. The OCC conducts examinations, which cover, among other banking functions, BSA compliance. The NCUA regulates federally chartered credit unions and federally insured, state-chartered credit unions. Most credit unions are small and considered to have limited exposure to money laundering activities. However, in December 2016 FinCEN imposed a civil monetary penalty against a New York-based credit union providing money-business services without updating its anti-money laundering program. The SEC protects investors against fraud and deceptive practices in securities markets. It also has authority to examine institutions it supervises for BSA compliance, including securities exchanges, securities issuers, investment advisers, investment companies, broker-dealers, and various industry professionals. The SEC also carries out joint examinations with self-regulatory organizations (SROs), including the Financial Industry Regulatory Authority (FINRA) and the New York Stock Exchange. The CFTC protects market users and the public from fraud and abusive practices in markets for most derivatives (e.g., commodity and financial futures, options, and swaps). It delegates BSA examination to its designated SROs, including the National Futures Association (NFA). Covered businesses include all registered futures commission merchants, "introducing brokers," commodity pool operators, and commodity trading advisors. Designated SROs monitor business practices and, as appropriate, take formal disciplinary actions, including prohibiting firms from conducting further business.

Federal Prosecution and Enforcement

Views on whether the U.S. government sufficiently enforces AML laws to deter future violators vary. Some policymakers argue that certain major financial institutions are insufficiently punished for AML violations, while others warn that further regulatory costs imposed on financial institutions for AML compliance could be viewed as untenable. Strong enforcement of AML laws and the effectiveness of money laundering deterrence have long been issues for Congress.

A 2016 report by the U.S. Government Accountability Office (GAO) found that from January 2009 to December 2015, federal agencies assessed roughly $5.1 billion in fines, forfeitures, and penalties (see Figure 2 ) for BSA/AML requirements. A separate 2016 analysis of AML enforcement found that penalties and fines for BSA violations had increased markedly since the 2008 financial crisis, and concluded that regulators had become more aggressive in pursuing BSA violations in the wake of the crisis. The report found that the number and size of BSA/AML penalties had grown, particularly after 2012: "Nearly 90% of BSA/AML enforcement actions from 2012 through 2015 included monetary penalties, compared to less than half from 2002 through 2011. Penalties have grown substantially in both absolute terms and as a proportion of firm capital."

Recent trends also highlight authorities' use of Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs) along with these fines and penalties. DPAs and NPAs have been used, often in conjunction with monetary penalties, as alternative enforcement tools that provide an agreement by authorities to defer criminal prosecution in exchange for an acceptance of tighter ongoing scrutiny by regulators for those institutions found to be lacking in compliance with the law. According to one study, the number of DPAs and NPAs in 2015 more than doubled as compared to the annual average since 2000.

Although the number of such agreements increased, the study found that certain federal judges had begun challenging the practice. Since the financial crisis, FinCEN and other regulators have reportedly increased their focus on individual and corporate responsibility for AML compliance. For instance, in announcing the December 2012 then-record monetary penalty on HSBC for BSA/AML compliance failures, the DOJ stated that HSBC had waived federal indictment and had accepted responsibility for its criminal conduct and that of its employees.

International Training and Technical Assistance

Several U.S. federal departments, agencies, and offices provide bilateral technical assistance and training on AML/CFT topics to foreign counterparts. The U.S. government also supports multilateral organizations that provide AML/CFT assistance, whether in the form of direct U.S. participation or funding. According to the Department of State, the U.S. government provided AML/CFT support to more than 100 countries in 2015, both bilaterally and with other donor nations and international organizations, in the form of training, mentoring, and other support for the full range of AML/CFT stakeholders. Such stakeholders included supervisory, law enforcement, prosecutorial, customs, and financial intelligence unit government personnel, as well as private sector entities. U.S. agencies involved in implementing such international AML/CFT support include the following.

U.S. Department of Homeland Security (DHS) . Includes Customs and Border Protection (CBP) and Immigration and Customs Enforcement's Homeland Security Investigations (ICE-HSI). U.S. Department of Justice (DOJ) . Includes the Drug Enforcement Administration (DEA), Offices within the Criminal Division (including the Office of Overseas Prosecutorial Development, Assistance, and Training [OPDAT], and the Asset Forfeiture and Money Laundering Section [AFMLS]), and the National Security Division (NSD). U.S. Department of State . Includes the International Narcotics and Law Enforcement Affairs Bureau (INL) and Counterterrorism Bureau (CT). U.S. Department of the Treasury . Includes the Financial Crimes Enforcement Network (FinCEN), International Revenue Service-Criminal Investigations (IRS-CI), Office of the Comptroller of the Currency (OCC), and Office of Technical Assistance (OTA). Board of Governors of the Federal Reserve System (FRB) . Among other initiatives, the Board of Governors and the Reserve Banks of the Federal Reserve System offer training and assistance for supervisors and staff of foreign central banks and foreign bank supervisory authorities, which includes courses on AML/CFT compliance and supervisions through the Fed's International Training and Assistance (ITA) programs.

These U.S. federal entities provide an array of international programming that spans the full range of AML/CFT matters. Illustrative programming includes DHS-CBP training workshops in detecting bulk cash smuggling, ICE-HSI cross-border financial investigation training (CBFIT), DOJ-OPDAT and DOJ-AFMLS training on financial investigations and asset recovery, State Department-managed trainings through its five International Law Enforcement Academies (ILEAs), and Treasury-OTA's comprehensive support to develop internationally compliant AML/CFT regimes through its Economic Crimes Team (ECT).

DHS special agents have also been placed on temporary assignment overseas as cross-border financial investigations advisors (CBFIAs), and federal prosecutors have been placed overseas on long-term assignments funded by the State Department and managed by DOJ-OPDAT, as resident legal advisors (RLAs). RLAs are located in Algeria, Bangladesh, Iraq, Kenya, Panama, Senegal, Turkey, and the United Arab Emirates (UAE, with regional responsibility for UAE, Bahrain, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, and Yemen). They focus on supporting host nations with the development and implementation of AML/CFT legal regimes; partially supported by counterterrorism funds, additional RLAs are located in the Philippines, Indonesia, and Malaysia. The State Department also funds Intermittent Legal Advisors (ILAs) in Colombia and Paraguay. In addition, the Treasury Department assigns attaches to U.S. overseas posts, including in UAE, Turkey, Iraq, China, Belgium, Egypt, Qatar, Pakistan, Afghanistan, Ukraine, Mexico, Russia, India, Saudi Arabia, Brazil, Singapore, and Japan.

AML/CFT technical assistance projects, including bilateral and multilateral efforts, have primarily been funded with foreign assistance accounts administered by the Departments of State and Treasury. Projects are also funded by the U.S. Agency for International Development (USAID), U.S. Embassies, and the U.S. government foreign aid agency Millennium Challenge Corporation, among others. U.S. funding for AML/CFT technical assistance across all government stakeholders is not comprehensively presented in an interagency format to Congress as part of the President's annual budget plans, but some illustrative trends in funding are available for some specific accounts, including technical assistance funded by Treasury's OTA (see Table 1 ). In the case of the State Department, although foreign assistance funding for combating terrorist financing is available, funding estimates for programming that addresses potentially broader AML objectives are not regularly reported to Congress (see Table 2 ). Rough estimates indicate that AML-related programming likely ranged between $10 million and $20 million annually between FY2010 and FY2015.

International Framework

Given the global nature of the international financial system and the transnational criminal activity that attempts to exploit it, the United States and other countries have engaged in a variety of international efforts designed to improve global AML responses and build international coordination and cooperation on AML issues, including through formal bilateral requests for mutual legal assistance on financial crime investigative matters. In addition, multiple international organizations contribute to international AML cooperation through global standard setting, cross-border information sharing, AML assessment and monitoring, and capacity building through technical assistance.

Some entities, such as the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision, provide standard-setting guidance relevant to AML matters. Others, such as the Egmont Group of Financial Intelligence Units and the International Criminal Police Organization (INTERPOL), contribute to the implementation of such standards through information sharing. The U.N. Office of Drugs and Crime (UNODC), the World Bank, and the IMF also maintain capabilities to variously monitor and assess the status of national AML policies, as well as provide technical assistance on AML capacity building priorities. Other international and regional organizations, including the Organization for Economic Cooperation and Development (OECD), the G-20, and the Organization of American States (OAS), have working groups and initiatives focused on various AML matters.

United Nations

The first U.N. treaty to require states parties to criminalize the laundering of illicit drug profits was the 1988 U.N. Convention Against the Illicit Traffic in Narcotic Drugs and Psychotropic Substances. The 1988 U.N. drug trafficking convention also committed states parties to "the widest measure of mutual legal assistance" for the investigation and prosecution of criminal offenses laid out by the treaty, including drug-related money laundering.

Building on these foundations, the 2000 U.N. Convention Against Transnational Organized Crime (UNTOC) broadened the scope of prohibited money laundering to cover the proceeds of all serious crime involving organized criminal groups. The UNTOC further requires all states parties to implement a comprehensive domestic regulatory and supervisory system for banks and nonbank financial institutions—with particular emphasis on requirements, akin to the BSA, on customer identification, recordkeeping, and the reporting of suspicious transactions. The UNTOC also recommends the domestic implementation of measures to detect and monitor the cross-border movement of cash and other negotiable instruments. The treaty also encourages bilateral, regional, and global cooperation for AML to include training and technical assistance on AML matters, as well as extradition, mutual legal assistance, criminalization of corruption, and asset seizure and confiscation.

The basic premise of the 2000 U.N. Convention Against Corruption (UNCAC) is to develop policies aimed at preventing public sector corruption and to require states parties to criminalize money laundering and implement a comprehensive domestic regulatory AML system. The UNCAC goes beyond the UNTOC to require that AML regimes also cover persons providing formal or informal value transfer services (e.g., money remitters). UNCAC also requires states parties to verify customer identities, including efforts to verify the identity of beneficial owners of funds, and to prohibit the establishment of high risk banks, particularly those that have no physical presence and that are not affiliated with a regulated financial group.

The United States has ratified the 1988 U.N. drug trafficking convention (1990), the UNTOC (2005), and the UNCAC (2006). It also ratified the International Convention for the Suppression of the Financing of Terrorism in 2002.

Financial Action Task Force (FATF)

The Financial Action Task Force (FATF) is an intergovernmental body, established in 1989, whose current mandate (2012-2020) focuses on setting global standards for the implementation of legal, regulatory, and operational measures for AML and other threats to the integrity of the international financial system, including terrorist financing. As Figure 3 shows, FATF is composed of a secretariat based in Paris at the headquarters of the OECD, and 37 member states or jurisdictions and other observers.

FATF issued a set of 40 recommendations on international standards for AML and combating the financing of terrorism, most recently adopted in 2012 and updated in 2016. It collaborates with other international stakeholders to identify and follow up on national-level financial vulnerabilities, particularly through periodic mutual evaluations that review participating country AML/CFT legal, financial, and regulatory systems. As of October 2016, FATF had identified 10 "high risk and non-cooperative jurisdictions." FATF's mandate document also notes that the IMF and the World Bank are providers of technical assistance and capacity building on combating money laundering, terrorist financing, and other related threats.

FATF's work is complemented by nine FATF-style regional bodies (FSRBs), whose primary purpose is to promote the implementation of FATF standards (see Figure 4 ). They play a key role in facilitating country requests for technical assistance and training and for gathering country-level information on money laundering typologies. The nine FSRBs are:

Asia/Pacific Group on Money Laundering (APG). Caribbean Financial Action Task Force (CFATF). Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL). Eurasian Group (EAG). Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). Financial Action Task Force of Latin America (GAFILAT). Inter-Governmental Action Group against Money Laundering in West Africa (GIABA). Middle East and North Africa Financial Action Task Force (MENAFATF). Task Force on Money Laundering in Central Africa (GABAC).

Other international entities that establish global standards and best practices for financial institutions, including banking regulatory and supervisory institutions, incorporate FATF's AML/CFT standards. Such entities include the Basel Committee, the global standard-setter for prudential regulation of banks and a forum for international cooperation on banking supervisory matters; its global standards include guidance on risk management and customer due diligence.

Another standard-setting body, the Egmont Group, has established guidance for national financial intelligence units (FIUs). Through its member network of 151 FIUs, including FinCEN, the Egmont Group facilitates information sharing and international cooperation on financial intelligence matters; its guidance documents are interlinked with the FATF standards. The Egmont Group also facilitates collaboration through personnel exchanges and training and technical assistance.

World Bank and International Monetary Fund

Both the World Bank and IMF contribute to international AML efforts. The World Bank supports such activities through research projects on illicit financial flows and national risk assessments for money laundering and terrorist financing. The World Bank's advisory package of guidance for conducting national risk assessments has been used in more than 40 countries since 2007. The World Bank and IMF also provide AML technical assistance and training. As part of the IMF's surveillance responsibilities of the international monetary system and its monitoring of member countries' economic and financial policies, the IMF has integrated evaluations, consistent with FATF, on AML/CFT matters. IMF technical assistance on AML/CFT matters has been funded, since 2009, through a multi-donor trust fund. The IMF's AML/CFT trust fund was renewed for a five-year term in May 2014. Donors (France, Japan, Luxembourg, the Netherlands, Norway, Qatar, Saudi Arabia, Switzerland, and the United Kingdom) have pledged more than $20 million through 2019—which has afforded the IMF to provide over $6.5 million annually in AML/CFT technical assistance and training. In a limited number of cases, AML/CFT measures have been incorporated into conditionality under Fund-supported programs.

Outlook for the 115th Congress

The 114 th Congress introduced or passed several bills pertaining to AML, and funded ongoing executive branch efforts, as well as holding a number of hearings exploring AML issues. Many of these efforts pertained to combating terrorist financing, sanctions, the disclosure of beneficial ownership, and corruption—issues that will likely persist during the 115 th Congress. As the 115 th Congress develops its legislative agenda, a number of AML policy questions remain—including the status of efforts to address the critiques of the December 2016 FATF mutual evaluation of the United States, particularly with respect to beneficial ownership transparency, and the implementation of enacted legislation from the 114 th Congress, particularly with respect to the application of new sanctions, including secondary sanctions, against designated foreign persons, entities, and jurisdictions. Drawing from past legislative activity, the 115 th Congress may also revisit proposals to require the executive branch to develop a roadmap for identifying key AML policy challenges and balancing AML priorities in a national strategy.

Although the national and international consequences of money laundering have the potential to be economically and politically significant, and despite robust AML efforts in the United States, challenges, both new (e.g., cyber-enabled financial crimes and emerging payment methods) and old (e.g., exploitation of cash and international trade for money laundering), remain. Over time, the scale of global money laundering and the diversity of illicit methods to move and store ill-gotten proceeds through the international financial system has not diminished. Gaps in legal, regulatory, and enforcement regimes, including uneven availability of international training and technical assistance for AML purposes, continue to limit the application of a globally consistent policy approach to AML. Ultimately, the crafting of AML policy involves an ongoing balance of implementation costs, relative to the risks and consequences of money laundering—a balance affected by statutory requirements, regulatory implementation, financial institution compliance, enforcement actions, international cooperation, and changing perceptions of the risk environment.

Some see the beginning of the 115 th Congress as an opportunity to revisit the existing AML policy framework, assess its effectiveness, and propose regulatory and statutory changes. In February 2017, for example, the financial services industry association The Clearing House offered multiple proposals to significantly modify the BSA/AML regime, including proposals to reshape the relationship between FinCEN and other federal regulators and oversight bodies, enact beneficial ownership legislation, modify SAR filing and disclosure requirements, and, ultimately, rebalance the distribution of financial and resource costs associated with preventing, identifying, and reporting on illicit financial activity. Other proposals may emerge as the 115 th Congress continues to tackle AML policy issues.