21/05/24

US: New US Treasury strategy targets crypto scams and real estate money laundering

As published on: icij.org, Tuesday 21 May, 2024. 

The U.S. Treasury Department will seek to operationalize use of the country’s new beneficial ownership information database by law enforcement and finalize moves to clamp down on real estate money laundering over the next two years, according to the latest national illicit finance strategy.

The broad strategy document, released Thursday, details the United States’ priorities for combatting evolving illicit finance risks, from the proliferation of digital assets to ransomware attacks.

“Since our last strategy issued in 2022, we have made a lot of progress, but we also find ourselves in a changing illicit finance threat environment,” a Treasury official said. “This risk environment includes a range of scams and frauds, potent ransomware attacks, an opioid driven overdose epidemic, foreign terrorist attacks, corruption and criminal exploitation of the technological advances in payments and financial products services.”

Treasury also plans to shore up compliance guidance for financial institutions; improve collaboration between law enforcement, U.S. national security and intelligence agencies and international partners; and develop new, secure platforms for financial transactions.

The strategy highlights several regulatory gaps that open up the U.S. financial system to exploitation. The document points to “a notable uptick” in state-backed actors exploiting international financial systems and “laundering and moving funds to wage war” and “facilitate terrorism,” referencing the Oct. 7, 2023 attack in Israel by Hamas militants and Russia’s ongoing war in Ukraine.

The U.S. has already issued hundreds of sanctions against financiers of Hamas and against people and entities linked to Russia’s war, including financial institutions who facilitate transactions on behalf of oligarchs, as well as freezing billions of dollars worth of Russian assets.

Treasury intends to modernize its anti-money laundering policies and invest in training for analysts and regulators to address emerging cryptocurrency threats, including those related to “pig butchering scams” — a specific form of fraud that involves luring people into risky cryptocurrency investments, often with elaborate, fabricated stories.


In January, Treasury’s financial crimes unit, FinCEN, launched its long-awaited beneficial ownership registry, which was met with mixed reactions: transparency advocates lauded the agency’s efforts to curb anonymous company ownership while some Republican members of Congress condemned the registry for increasing bureaucracy for small businesses, as ICIJ previously reported.

The Treasury official said the agency is taking “a phased approach” to providing law enforcement and national security officials access to the database but did not specify a timeline. Improved access to beneficial ownership information will help officials “untangle opaque corporate structures and hold criminals to account,” according to the department.

The strategy also identified all-cash purchases as a major vulnerability in the residential real estate market and underscored the department’s efforts to tackle property purchases made with suspicious funds, a popular method for criminals and corrupt foreign officials to launder money.

In March, federal prosecutors sought to seize two New York apartments, reportedly purchased by former Mongolian Prime Minister Sükhbaataryn Batbold using illicit funds. Then, prosecutors filed a forfeiture complaint over a $7.1 million Manhattan apartment allegedly purchased for the “personal enrichment” of Claudia Lemboumba Sassou Nguesso, the daughter of the Republic of Congo’s authoritarian president.

Earlier this year, FinCEN proposed a rule that would expose bad actors who buy real estate in cash or through secretive legal entities. The rule only applies to residential properties, but the agency has flagged plans to propose a rule related to commercial properties.

“We have collected information on residential real estate and have assessed that the risk is such that we do need to regulate the industry, given the illicit finance risk,” the official said. “For right now, that’s really all we’re considering.”

The strategy also takes aim at investment advisers, who, until recently, were not subject to anti-money laundering obligations. In March, FinCEN proposed a rule that would require some investment advisers to implement anti-money laundering programs and report suspicious activity to FinCEN, similar to existing obligations for banks.

“Treasury should quickly finish the job and finalize rules to ensure that investment advisers can no longer turn a blind eye in assisting illicit investors,” said Gary Kalman, the executive director of advocacy group Transparency International U.S.

 

Tags

US US Treasury Crypto scam Real Estate AML Anti money laundering

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