Overview of U.S. Anti-Money Laundering Statutes and OFAC Role

authorized the Director of the ONDCP to designate areas within the United States that exhibit serious drug trafficking problems and harmfully impact other areas of the country as High Intensity Drug Trafficking Areas (HIDTAs). The HIDTA program aims to improve the effectiveness and efficiency of drug control efforts among local, state and federal law enforcement agencies. The Annunzio-Wylie Anti-Money Laundering Act of 1992 gave protection from civil liability to any financial institution, or director, officer or employee thereof, who/that makes a Suspicious Activity Report (SAR) under any local, state or federal law. The Annunzio-Wylie Act made it illegal to disclose when a SAR is filed. It also made it illegal to operate a money transmitting business without a license where such a license is required under state law, and required all financial institutions to maintain records of domestic and international funds transfers. In addition, this Act introduced the “death penalty,” mandating that bank regulators consider taking action to revoke the charter of any banking organization that is found guilty or pleads guilty to a charge of money laundering. The Money Laundering Suppression Act of 1994 (MLSA) specifically addressed money services businesses (MSBs), requiring each MSB to register and maintain a list of its agents. In addition to making it a federal crime to operate an unregistered MSB, the MLSA encouraged states to adopt uniform laws applicable to MSBs. It also established procedures that allowed banks to exempt certain customers from Currency Transaction Report (CTR) filing. Continuing with the trend of developing a national strategy to combat money laundering, the Money Laundering and Financial Crimes Strategy Act of 1998 called for the designation of areas at high-risk for money laundering and related financial crimes by geography, industry, sector or institution. Some of these areas were later designated as High Risk Money Laundering and Related Financial Crimes Areas (HIFCAs). The HIFCA program was created to coordinate the efforts of local, state and federal! law enforcement agencies in the fight against money laundering. The Intelligence Reform and Terrorism Prevention Act of 2004 amended the BSA to require the U.S. Treasury Secretary to prescribe regulations requiring certain financial institutions to report cross-border electronic transmittals of funds, if the Secretary determines such reporting is “reasonably necessary” to aid in the fight against money laundering and terrorist financing. 11. | What is the role of the Office of Foreign Assets Control (OFAC) and how does it fit into AML laws and regulations? The purpose of OFAC is to promulgate, administer and enforce economic and trade sanctions against certain individuals, entities and foreign government agencies and countries whose interests are considered to be at odds with U.S. policy. Sanctions programs target, for example, terrorists and terrorist nations, drug traffickers and those engaged in the proliferation of weapons of mass destruction. Overviews and details of the OFAC Sanctions programs can be found on OFAC’s website at www.treas.gov/ofac. OFAC regulations are not part of AML compliance per se, but since the OFAC Sanctions lists include alleged money launderers and terrorists and USA PATRIOT Act requirements mandate that certain financial institutions vet customer names against the OFAC list, institutions often consider the OFAC program to be a subset of their overall AML program. For additional guidance, please refer to the Office of Foreign Assets Control and International Government Sanctions Programs section. 12. How can one measure the effectiveness of an AML regime? A number of factors can be considered when assessing the effectiveness of an AML regime, including the number of money laundering/terrorist financing investigations, prosecutions and convictions, number and amount of frozen/seized assets, identification of deficiencies in financial institutions in examinations by regulatory authorities, and quality of coordination among financial institutions, regulatory and law enforcement authorities. For additional guidance on tools and techniques used to assess the effectiveness of AML systems, please refer to the Financial Action Task Force section. 13. How do U.S. regulations compare to international AML regulations? The United States' role as a leader in the fight against money laundering and terrorist financing dates back 40 years to the passage of the Bank Secrecy Act in 1970. Through the ensuing decades and especially following the terrorist activities of September 11, 2001, the United States has reinforced its commitment through the passage of a number of additional money laundering-related laws, issuance of extensive regulatory guidance and aggressive enforcement. That said, the United States, as with many other major jurisdictions, is not in full compliance with the FATF Recommendations. In fact, FATF in its most recent assessment of the United States’ anti-money regime, identified several areas in need of improvement, including: customer due diligence relating to beneficial owners, authorized protiviti | 12 HOUSE_OVERSIGHT_024118