Category: Anti-Money Laundering

Specially Designated Nationals and Blocked Persons List Updated

The Office of Foreign Assets Control has just updated the Specially Designated Nationals and Blocked Persons List.

It is a big list. The .pdf file is 404 pages long. The separate file of additions in 2008 is 106 pages long.

Here are the new bad guys added on October 30, 2008:

ABDELRAHIM, Abdelbasit (a.k.a. ABDUL RAHIM, Abdul Basit Fadil; a.k.a. ABDULRAHIM, Abdulbasit; a.k.a. ABOU BASSIR; a.k.a. ABU BASIR; a.k.a. ADBULRAHIM MAHOUD, Abdulbasit Fadil; a.k.a. AL ZAWY, Abdel Bassit Fadil; a.k.a. AL-ZAWI, ‘Abd Al-Basit Fadhil; a.k.a. AL-ZWAY, ‘Abd Al-Basit Fadil; a.k.a. MANSOUR, Abdallah; a.k.a. MANSOUR, Abdullah; a.k.a. MANSUR, ‘Abdallah), undetermined; DOB 2 Jul 1968; POB GDABIA, LIBYA; alt. POB Ajdabiyah, Libya; nationality United Kingdom (individual) [SDGT]

ABU MU’AWIYA (a.k.a. AL USTA, Abdelrazag Elsharif; a.k.a. AL-MULAY, ‘Abd; a.k.a. ALUSTA, ‘Abd Al-Razzaq Al-Sharif; a.k.a. ELOSTA, Abdelrazag Elsharif; a.k.a. SHARIF, ‘Abd al- Razzaq), undetermined; DOB 20 Jun 1963; POB SOGUMA, LIBYA; nationality United Kingdom (individual) [SDGT]

AL HAK, Al Haj Abd (a.k.a. AL MABROOK, Muftah; a.k.a. AL-FATHALI, Al-Mabruk; a.k.a. AL-FATHALI, Al-Mabruk Muftah Muhammad; a.k.a. EL MABRUK, Muftah; a.k.a. EL MOBRUK, Maftah; a.k.a. ELMABRUK, Maftah Mohamed; a.k.a. ELMABRUK, Mustah; a.k.a. MAFTAH, Elmobruk; a.k.a. “AL HAQQ, Al Hajj Abd”; a.k.a. “AL-HAQ, Haj ‘Abd”; a.k.a. “AL-HAQQ, Al-Hajj ‘Abd”), undetermined; DOB 1 May 1950; POB Libya; nationality Libya (individual) [SDGT]

FinCEN Programs for Mutual Funds

Here are links to the text of some FinCEN program for mutual funds:

31 CFR 103.130 Anti-money laundering programs for mutual funds(.pdf)

each mutual fund shall develop and implement a written anti-money laundering program reasonably designed to prevent the mutual fund from being used for money laundering or the financing of terrorist activities and to achieve and monitor compliance. . .

31 CFR 103.131 Customer identification programs for mutual funds(.pdf)

A mutual fund must implement a written Customer Identification Program (‘‘CIP’’) appropriate for its size and type of business that, at a minimum, includes each of the requirements of
paragraphs (b)(1) through (5) of this section.

FinCEN Withdraws Proposed Rulemaking for Unregistered Investment Companies

On September 26, 2002, Financial Crimes Enforcement Network issued a notice of proposed rulemaking, proposing to require unregistered investment companies” to establish and implement anti-money laundering programs. (Anti-Money Laundering Programs for Unregistered Investment Companies, 67 FR 60617 (Sep. 26, 2002))

In that notice of proposed rulemaking, FinCEN proposed to define the term “unregistered investment company” as (1) an issuer that, but for certain exclusions, would be an investment company as that term is defined in the Investment Company Act of 1940, (2) a commodity pool, and (3) a company that invests primarily in real estate and/or interests in real estate. FinCEN proposed requiring these companies to file a notice so that FinCEN could readily identify such companies and require them to establish and implement anti-money laundering programs.

Today they gave notice under 31 CFR Part 103 Withdrawal of the Notice of Proposed Rulemaking for Anti-Money Laundering Programs for Unregistered Investment Companies. FinCEN is not abandoning the possibility of pursing the rulemaking. Given the six year span since the notice, they feel it has gone stale. If (or when) they decide to proceed with an anti-money laundering program requirement for unregistered investment companies, they will publish a new notice.

Money Laundering Reporting Officer Fined

The Financial Servies Authority of the United Kindom fined Sindicatum Holdings Limited £49,000 and its money laundering reporting officer (MLRO), Michael Wheelhouse, £17,500 for not having adequate anti-money laundering systems and controls in place for verifying and recording clients’ identities. [FSA fines firm and MLRO for money laundering controls failings]  Apparently this is the first time the FSA has fined a money laundering reporting officer. The FSA did not find any evidence of money laundering at the firm.

In the final notice for Mr Michael Wheelhouse, the FSA states:

2.1. Throughout the Relevant Period, Mr Wheelhouse was approved by the FSA to perform and performed the controlled function of Money Laundering Reporting Function (CF11). As such, he was the Firm’s money laundering reporting officer. In that role, he had responsibility for oversight of the Firm’s compliance with the FSA’s rules on systems and controls against money laundering.

2.2. However, in performing that role and discharging CF11, Mr Wheelhouse failed to take reasonable steps to ensure that the business of the Firm for which he was responsible in his controlled function complied with the relevant standards and requirements of the regulatory system (as required by Statement of Principle 7 of APER (“Statement of Principle 7”)).

2.3. Mr Wheelhouse breached Statement of Principle 7 by failing to take reasonable steps to implement adequate procedures for verifying the identity of the Firm’s clients; by failing to ensure that the Firm adequately verified the identity of a significant number of its clients; and by failing to ensure that the Firm kept adequate records to demonstrate that it had verified the identity of a significant number of its clients.

Real Money Laundering

The October 2008 edition (.pdf) of The SAR Activity Review, Trends, Tips and Issues published by the Financial Crimes Enforcement Network, has a great story on page 29 about a marijuana smuggling and money laundering operation.

The organization was concerned that the cash smelled like marijuana. The benk tellers even noticed the smell of marijuana on the money. The organization ended up washing and ironing the cash to remove the smell.

Too late. The teller filed a Suspicious Activity Report on the marijuana money which then focused law enforcement on subsequent deposits. Law enforcement had previously been keeping an eye on individuals in the organization.  Over the course of the investigation, they tracked more than 1,000 kilograms of marijuana that the organization distributed into the local market.

Dirty money lead to 30 jail sentence for the leader of the organization.

FinCEN Proposes Regulatory Simplification

In a news release, the Financial Crimes Enforcement Network (FinCEN) announced the publication of a proposal to simplify its rules and regulations by centralizing them in its own new chapter of the Code of Federal Regulations.

The current organizational structure of FinCEN regulations developed over many years, during which Congress expanded FinCEN’s authority . As a result, the regulations are somewhat difficult to navigate. FinCEN’s regulations are currently included in the CFR as Part 103 in Chapter I under “Title 31, Money and Finance: Treasury.” FinCEN is proposing to reorganize and renumber its regulations into a new tenth chapter of Title 31 which would appear as “Title 31 Chapter X – Financial Crimes Enforcement Network.”

The proposal includes two structural changes to the organization of the BSA regulations. FinCEN regulations would be reorganized into a “General Provisions” part and then separate parts for each type of financial institution that has a BSA obligation. Therefore, under this simplified proposal, a compliance official for a Money Services Business, for example, would need only to look under “General Provisions” and then under “Rules for Money Services Businesses” to find pertinent FinCEN regulations. Additionally, FinCEN is proposing a numbering logic to its regulations. By having a uniform numbering system, specific FinCEN regulations will be easier to identify. For example, regulatory requirements for reports of suspicious transactions are proposed to be reorganized as 1010.320. The citation .320 will be universal in the part for each type of financial institution as well. The requirement for reports of suspicious transactions for banks will be 1020.320, for casinos and card clubs will be 1021.320, brokers or dealers in securities 1023.320, etc.

The Notice of Proposed Rulemaking is on the FinCEN website.

James H. Fries, Jr. on The Objectives and Conduct of Bank Secrecy Act Enforcement

James H. Fries, Jr., the Director of Financial Crimes Enforcement Network at the U.S. Department of Treasury spoke about The Objectives and Conduct of Bank Secrecy Act Enforcement at the ABA/ABA Money Laundering Enforcement Conference in Washington D.C. on October 20, 2008.

“An essential principle of FinCEN’s enforcement program is to uphold the public policy choice made by the Congress when it enacted the BSA in 1970, and expanded it with the passage of Annunzio-Wylie Anti-Money Laundering Act of 1992, The Money Laundering Suppression Act of 1994, and the USA PATRIOT Act of 2001.”

The Specially Designated Nationals List (SDN)

The Office of Foreign Assets Control in the Treasury Department keeps the Specially Designated Nationals List (SDN).  The Specially Designated Nationals List is a publication of OFAC which lists individuals and organizations with whom United States citizens and permanent residents are prohibited from doing business.

A Money Services Business Guide to Money Laundering Prevention

The Financial Crimes Enforcement Network published the Money Services Business Guide to Money Laundering Prevention (pdf).

The manual starts with the definition of a “Money Service Business.”

Your business may be an MSB (Money Services Business) if…
The business offers one or more of the following services:
■ money orders
■ traveler’s checks
■ check cashing
■ currency dealing or exchange
■ stored value
-AND

The business:
■ Conducts more than $1,000 in money services business activity with the same person (in one
type of activity) on the same day.
-OR

The business:
■ Provides money transfer services in any amount.