Financial Crime World

Unmasking the Shadows: Treasury’s Steps to Increase Financial Transparency and Combat Illicit Finance in the US

The U.S. Department of the Treasury has taken several initiatives over the past few months to enhance the country’s anti-money laundering and countering the financing of terrorism (AML/CFT) framework. In an effort to fortify America’s financial system against illicit actors, the department has focused on addressing the issues of anonymous shell companies, the residential real estate sector, and the investment adviser sector.

Addressing Anonymous Shell Companies with the Corporate Transparency Act

The first significant step in this journey was the implementation of the Corporate Transparency Act in 2021. This bipartisan legislation requires companies doing business or registered in the United States to report vital information about their ultimate beneficial owners or controllers to the Financial Crimes Enforcement Network (FinCEN).

  • Beneficial ownership reporting begins on January 1, 2024. The collection and reporting of this information will significantly improve the country’s ability to untangle opaque corporate structures and hold the guilty accountable.
  • This measure also promotes a level playing field for honest small businesses.

Combating the Lack of Transparency in the Residential Real Estate Sector

A second area of concern is the residential real estate sector, which has long been exploited by illicit and other criminal actors looking to hide ill-gotten proceeds.

  • FinCEN issued a Notice of Proposed Rulemaking on February 7, 2023, to increase transparency in the U.S. residential real estate sector.
  • Under the proposed regulations, professionals involved in real estate closings and settlements would be required to report non-financed transfers of residential real estate to legal entities or trusts to FinCEN.

Protecting the Investment Adviser Sector from Abuse

The investment adviser sector is a significant contributor to the U.S. economy but can also serve as a gateway for illicit actors seeking to exploit the U.S. financial system.

  • FinCEN issued a Notice of Proposed Rulemaking on February 13, 2023, to require certain investment advisers to comply with AML/CFT requirements from the Bank Secrecy Act.
  • These measures include implementing risk-based AML/CFT programs, reporting suspicious activity to FinCEN, and fulfilling relevant recordkeeping requirements.

Understanding the Complex Illicit Finance Risk Environment

The Department of the Treasury’s 2024 National Risk Assessments on Money Laundering, Terrorist Financing, and Proliferation Financing highlight the significant threats, vulnerabilities, and risks facing the United States. Key issues include:

  • The ongoing fentanyl crisis
  • Potential foreign and domestic terrorist attacks
  • The growth of ransomware attacks
  • Geopolitical tensions, such as Russia’s ongoing war in Ukraine and Hamas’s October 7, 2023, terrorist attacks in Israel

Stay Informed on Illicit Finance Risks and Trends

For further information on illicit finance risks and trends, consult the:

  • 2024 National Risk Assessments
  • US Sectoral Illicit Finance Risk Assessment: Investment Advisers
  • The Treasury Department’s alert on Potential U.S. Commercial Real Estate Investments by Sanctioned Russian Elites, Oligarchs, and Their Proxies in 2023.