CUBE RegNews:
October 4^th

US Treasury notes US AML shortcomings

In a speech at an ACAMS event, Elizabeth Rosenberg, Assistant Secretary for Terrorist Financing and Financial Crimes at the US Department of the Treasury, addressed key aspects of the US’s AML/CFT regime, emphasizing its historical effectiveness while acknowledging existing regulatory gaps. Rosenberg stressed the importance of closing these gaps to maintain a strong financial system. 

She began by highlighting the crucial role played by AML/CFT compliance professionals in supporting national security by detecting and unraveling illicit activities. Rosenberg also discussed the ongoing efforts to address gaps — particularly in beneficial ownership, real estate, investment advisors, and non-financial gatekeepers like lawyers and trusts — and the importance of an outcomes-focused approach, urging a more innovative response to evolving threats. 

Rosenberg also discussed the interconnectedness of strengthening the US domestic AML/CFT regime and imposing effective sanctions, especially regarding Russia’s actions in Ukraine. Explaining this, she gave an example of how “effective, up-to-date AML regime will help institutions identify the money laundering that aids Russian efforts and exposes Kremlin-aligned funds, such as the $1 billion Treasury blocked in a Delaware-based trust last year”. 

She stressed that financial institutions are essential in ensuring sanctions have their intended effect, and urged proactive measures to identify and mitigate illicit activities related to Russian sanctions evasion. 

FinCEN chief outlines real estate and IA plans

At the same ACAMS event, FinCEN director Andrea Gacki picked up on a couple of the themes from Rosenberg’s speech to explain how the gaps in beneficial ownership issues, real estate and investment advisers were being addressed. 

Gacki listed several documents FinCEN has recently published, along with webinars and other content, to help facilitate the implementation of the beneficial ownership information reporting requirements of the Corporate Transparency Act. 

Gacki went on to discuss money laundering risks in the real estate sector, noting that a notice of proposed rulemaking to address the potential for money laundering created by real estate transactions in the commercial and residential sectors is being developed. 

She also discussed re-evaluating anti-money laundering and countering the financing of terrorism (AML/CFT) risks posed by investment advisers, who are generally not subject to the AML/CFT requirements of the Bank Secrecy Act. 

She also highlighted FinCEN’s involvement in combatting the trafficking of fentanyl and its precursor chemicals and introduced an upcoming whistleblower program related to AML and sanctions. 

Basel III implementation update

The Bank for International Settlements has published an update for the implementation of Basel III standards to improve the regulation, supervision, and risk management of banks. The update notes that, since the September 2022 update: “member jurisdictions have continued to make good progress in implementing the outstanding Basel III standards, with almost two-thirds of the new adoptions relating to these standards. Most member jurisdictions have published draft rules and are in the process of implementing the outstanding Basel III standards, while around a third have implemented all, or the majority of them.”

All aspects of the Basel III framework were due to be implemented by 1^st January 2023 with a five-year phase-in for some elements. 

The UK’s Prudential regulatory Authority has announced it proposes to run a dynamic general insurance stress test in 2025. 

The objectives of the exercise will be to: 

• assess the industry’s solvency and liquidity resilience to a specific adverse scenario;  
• assess the effectiveness of insurers’ risk management and management actions following an adverse scenario; and 
• inform the Prudential Regulator Authority’s (PRA) supervisory response following a market-wide adverse scenario.