Financial Crime World

Risk-Based Approach to Financial Crime in the United States Needs Improvement

A recent report by the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering (APG) has highlighted significant gaps in the United States’ risk-based approach to financial crime, despite having a well-developed anti-money laundering and counter-terrorist financing (AML/CFT) regime.

US AML/CFT Regime: Strengths and Weaknesses

Effectiveness in Investigating and Prosecuting Terrorist Financing

The report found that the US is highly effective in investigating and prosecuting terrorist financing, with a high priority given to addressing these risks. The country has successfully convicted individuals for terrorist financing and pursued high-value confiscations.

  • Over $4.4 billion in confiscations in 2014
  • National coordination and cooperation on AML/CFT issues have improved significantly since the last evaluation

Gaps in Risk Mitigation through Regulatory Framework

However, the report identified significant gaps in the US’s risk mitigation through its regulatory framework, including:

Minimal Coverage of Designated Non-Financial Businesses and Professions

  • Investment advisers
  • Lawyers
  • Accountants
  • Real estate agents
  • Trust and company service providers (other than trust companies)

Lack of Comprehensive AML/CFT Supervision for Other Designated Non-Financial Businesses and Professions

While AML/CFT supervision of the banking and securities sectors appears to be robust, there is a lack of comprehensive AML/CFT supervision for other designated non-financial businesses and professions.

Recommendations for Fundamental Improvements

The report recommends fundamental improvements in areas such as access to accurate beneficial ownership information in a timely manner. The FATF adopted the report at its October 2016 Plenary meeting, highlighting the need for the US to address these significant gaps in its risk-based approach to financial crime.

Key Recommendations

  • Improve access to accurate beneficial ownership information
  • Enhance AML/CFT supervision for designated non-financial businesses and professions
  • Address regulatory gaps in areas such as investment advisers, lawyers, accountants, real estate agents, trust and company service providers (other than trust companies)

By addressing these significant gaps in its risk-based approach to financial crime, the US can further improve its AML/CFT regime and maintain its position as a global leader in combating terrorist financing and money laundering.