Category Archives: Anti-Money Laundering (AML)

FinCEN Proposes Highly Anticipated Investment Adviser AML/CFT Rule

by David Sewell, Timothy Clark, Stephanie Brown-Cripps, Nathaniel Balk, Nathalie Kupfer, and Rosie Jiang

Top (left to right): David Sewell, Timothy Clark, and Stephanie Brown-Cripps
Bottom (left to right): Nathaniel Balk, Nathalie Kupfer, and Rosie Jiang
(Photos courtesy of Freshfields Bruckhaus Deringer LLP)

On February 13, 2024, the U.S Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a proposed rule to extend anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance obligations to certain types of investment advisers operating in the United States (Proposed Rule).[1] The agency simultaneously released a “2024 Investment Adviser Risk Assessment” (Risk Assessment), its first comprehensive effort to describe and measure “illicit finance threats involving investment advisers.”[2]

FinCEN’s release marks the latest development in a decades-old debate about whether investment advisers should be subject to the Bank Secrecy Act (BSA) and the attendant AML/CFT requirements that have long been applied to banks, broker-dealers, and other financial institutions. If adopted in the current (or a similar) form, the Proposed Rule would bring this long-running debate to a close once and for all.

Below, we briefly summarize the Proposed Rule, including its scope, requirements and potential implications, and highlight open questions and next steps.

Continue reading →

White-Collar and Regulatory Enforcement: What Mattered in 2023 and What to Expect in 2024

by John F. Savarese, Ralph M. Levene, Wayne M. Carlin, David B. Anders, Sarah K. Eddy, Randall W. Jackson, and Kevin S. Schwartz

Top left to right: John F. Savarese, Ralph M. Levene, Wayne M. Carlin, and David B. Anders.
Bottom left to right: Sarah K. Eddy, Randall W. Jackson, and Kevin S. Schwartz. (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

This past year was yet another notable and intensely active one across the entire range of white-collar criminal and regulatory enforcement areas. We heard continued tough talk from law enforcement authorities, especially concerning the government’s desire to bring more enforcement actions against individuals and on the need to keep ramping up corporate fines and penalties. The government largely lived up to its talking points about increasing the numbers of individual prosecutions and proceedings, particularly with respect to senior executives in the cryptoasset industry. But there were some notable stumbles. The most striking example of this was DOJ’s failure to secure convictions in cases where it attempted to extend criminal antitrust enforcement in unprecedented areas, such as no-poach employment agreements and against certain vertical arrangements—neither of which has historically been viewed as involving per se violations of the federal antitrust laws. And, as in years past, many state attorneys general remained active throughout 2023, using broad state consumer-protection statutes to bring blockbuster cases across a wide array of industries, from ridesharing and vaping to opioids and consumer technology offerings.

Continue reading →

Creating A European Union-Wide Anti-Money Laundering/Counter Financing of Terrorism Regime (Part II): Changes in Anti-Money Laundering Rules

by Jonathan J. Rusch

Photo courtesy of the author

As part of its continuing efforts to strengthen the capacity and capability of the European Union (EU) to combat money laundering and terrorism financing[1], on January 18, 2024 the Council of the European Union announced that it and the European Parliament had found a provisional agreement on parts of the anti-money laundering and countering the financing of terrorism (AML/CFT) package to protect EU citizens and the EU’s financial system.

This provisional agreement is intended to accomplish two fundamental objectives: (1) to transfer all AML/CFT rules applying to the private sector to a new regulation; and (2) in doing so, for the first time to make those rules more stringent and harmonize them “exhaustively”, in order to close possible loopholes that criminals use to launder illicit proceeds or finance terrorist activities through the financial system.[2]

The first post in this series covered the provisional agreement relating to the creation and operation of a new EU-wide anti-money laundering authority (AMLA).[3] This post will summarize and comment on the extensive and detailed provisions of this provisional agreement with regard to two elements: (1) the new AML regulation[4]; and (2) a new AML/CFT directive (to be designated by the EU as the “Sixth Anti-Money Laundering Directive”) that would establish the mechanisms that EU Member States should put in place for AML/CFT purposes and repeal the EU’s 2015 Fourth AML Directive.[5]

Continue reading →

Creating A European Union-Wide Anti-Money Laundering/Counter Financing of Terrorism Regime (Part I): The Anti-Money Laundering Authority

by Jonathan J. Rusch

Photo courtesy of the author

Introduction

Since 2018, when the then-European Commissioner for Justice Věra Jourová described the Danske Bank money-laundering catastrophe[1] as “the biggest scandal in Europe”[2], the European Commission (EC), as the politically independent executive arm of the European Union (EU)[3], has worked assiduously to repair the substantial defects in Europe’s anti-money laundering and counter-financing of terrorism (AML/CFT) mechanisms.

Continue reading →

A View from Abroad: Unpacking DOJ’s M&A Safe Harbor Policy, Part II

by Joel M. Cohen, Marietou Diouf, James Hsiao, Francisco Málaga Diéguez, Aleksandra Oziemska, Jean-Pierre Picca, Anneka Randhawa, Jean-Lou Salha, Dr. Daniel Zapf, Dr. Nicolas Rossbrey, and Dr. Tine Schauenburg

Top left to right: Joel M. Cohen, Marietou Diouf, James Hsiao, Francisco Malaga, Aleksandra Oziemska, and Jean-Pierre Picca. Bottom left to right: Anneka Randhawa, Jean-Lou Salha, Daniel Zapf, Dr. Nicolas Rossbrey, and Dr. Tine Schauenburg (Photos courtesy of White & Case LLP)

On October 4, 2023, United States Deputy Attorney General (DAG) Lisa Monaco announced a new Department of Justice (DOJ) Mergers & Acquisitions Safe Harbor policy that encourages companies to self-disclose criminal misconduct discovered by an acquiring company during the acquisition of a target company. Under the policy, the acquiring party will receive a presumption of criminal declination if it promptly and voluntarily discloses criminal misconduct, cooperates with any ensuing investigation, and engages in appropriate remediation, restitution and disgorgement. While the DOJ has offered little guidance as to what it might expect from a company that self-discloses under the policy, many jurisdictions outside the United States offer corporate self-disclosure and cooperation incentives. This alert analyzes several of those practices in Europe and Asia, and what can be learned from their application. Continue reading →

Recent Developments in Switzerland’s Anti-Corruption and Anti-Money Laundering Regime

by Jonathan Rusch

Photo courtesy of the author

For some time, Switzerland has generally ranked highly in perceptual surveys of corruption.[1] But while some may believe that “generally speaking, Switzerland has a comprehensive anti-corruption and anti-money laundering regulatory regime”[2], that regime has not kept pace with a number of other countries. Indeed, a 2021 report by the Council of Europe’s Group of States against Corruption (GRECO) stated that since the 2017 GRECO report on Switzerland, Switzerland had satisfactorily addressed only five out of the twelve recommendations contained in a 2017 GRECO report.[3]

Since then, however, Switzerland has moved forward on several fronts to bolster its anti-corruption and anti-money laundering (AML) regime. Three recent developments indicate that progress. First, on August 30, the Swiss Federal Council (the governing body of the Swiss government[4]) launched the consultation procedure on a bill to strengthen the country’s AML framework, including the introduction of a beneficial ownership registry.[5] Second, on September 28, the Swiss Attorney General filed an indictment against former Uzbek government official and prolific bribe-taker Gulnara Karimova and a co-conspirator for participation in a criminal organization, money laundering, and related charges.[6] Third, on December 6, the Swiss Attorney General filed an indictment against a leading global commodities trading company, Trafigura Beheer BV (Trafigura), and three individuals for bribery in connection with Trafigura’s activities in the Angolan petroleum industry.[7] This post will summarize and comment on these developments.

Continue reading →

Former Prosecutors and Crypto Experts Comment on the Binance/Changpeng Zhao Enforcement Actions

The NYU Program on Corporate Compliance and Enforcement (PCCE) is following the recent federal enforcement actions against Binance, the world’s largest cryptocurrency exchange, and its founder Changpeng Zhao. In this post, crypto experts, former prosecutors, and the former Superintendent of the New York Department of Financial Services offer their expert insights on these developments.

Left to right: Maria Vullo, Eugene Ingoglia, Daniel Payne, Ijeoma Okoli, and Paul Krieger (Photos courtesy of authors)

Continue reading →

SEC Staff Play the Hits: 2024 Exam Priorities Focus on Private Funds, Marketing and Crypto

by Robin M. Bergen, Elizabeth Lenas, Amber V. Phillips, and Anna Bintinger

From left to right: Robin M. Bergen, Elizabeth Lenas, Amber V. Phillips, and Anna Bintinger (Photos courtesy of Cleary Gottlieb Steen & Hamilton LLP)

The U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”) released its 2024 examination priorities on October 16, 2023 (the “2024 Priorities”), launching a new release schedule to align with the fiscal year. As in the 2023 examination priorities (the “2023 Priorities”), private fund advisers received special focus, with broad topic areas spanning both the existing Staff sweeps on custody, marketing and artificial intelligence, as well as renewed scrutiny of valuations and investment processes. Despite its release causing much fanfare, there was surprisingly little overlap between the 2024 Priorities and the newly adopted Private Fund Adviser Rules; the focus on fees and expense allocation carried over from the Private Fund Adviser Rules, and the Division picks up a theme from its adopting release by taking a shot at limited partnership advisory committees (“LPACs”) and compliance with private fund governance procedures.

The 2024 Priorities address private funds; standards of conduct (particularly fiduciary duties and conflicts of interest); information security and operational resiliency; emerging technologies and crypto; regulation systems compliance and integrity; broker dealers and exchanges; anti‑money laundering; oversight of the Financial Industry Regulatory Authority and Municipal Securities Rulemaking Board programs and policies; and oversight of municipal advisers, security-based swap dealers and transfer agents.

Continue reading →

FinCEN Proposes Rule Targeting International Convertible Virtual Currency Mixers

by Robert A. Cohen, Kendall Howell, Paul D. Marquardt, Will Schisa, Daniel P. Stipano, Charles Marshall Wilson, and Zachary Zweihorn

Top left to right: Robert A. Cohen, Kendall Howell, Paul D. Marquardt, and Will Schisa.
Bottom left to right: Daniel P. Stipano, Charles Marshall Wilson, and Zachary Zweihorn.
(Photos courtesy of Davis Polk & Wardwell LLP).

FinCEN released a proposed rule that would identify international convertible virtual currency mixing as a class of transactions of “primary money laundering concern” – a designation that would result in additional reporting and recordkeeping requirements for financial institutions for transactions involving CVC mixers.

On October 19, 2023, the Financial Crimes Enforcement Network (FinCEN) released a notice of proposed rulemaking (NPRM) that would designate transactions involving international convertible virtual currency[1] mixing (CVC mixing) as a class of transactions of primary money laundering concern.[2] Once implemented, the proposed rule would require covered financial institutions to collect and report certain details on transactions in CVC (including bitcoin and other digital assets) that the institutions know, suspect, or have reason to suspect involve CVC mixing activities outside of the United States. The NPRM is one of a series of measures that the United States Treasury Department (Treasury) has taken in recent years to target CVC mixers, which are third-party services used to anonymize cryptocurrency transactions.[3] According to Treasury, North Korea, terrorist groups, and other illicit actors have exploited CVC mixers to launder criminal proceeds and evade sanctions. FinCEN believes that the NPRM will curb the misuse of CVC mixers and facilitate law enforcement investigations into CVC transactions.

Continue reading →

SEC Enforcement Actions Reflect Expansion of SEC’s AML Compliance Focus: Broker-Dealers, Investment Advisers, Registered Investment Companies, and Individuals Must Take Note

by Michael J. Leotta, David H. Tutor, and Cindy M. Bi

From left to right: Michael J. Leotta, David H. Tutor, and Cindy M. Bi (Photos courtesy of WilmerHale)

The SEC recently announced AML-related charges against an individual registered representative for failing to escalate red flags of potentially suspicious activity, as well as charges against a registered investment adviser for causing mutual funds it advised to fail to adopt an AML program reasonably designed for its business. Taken together, these enforcement actions reflect the continued expansion of the SEC’s efforts to police AML compliance beyond the traditional charges against broker-dealers for failures to file Suspicious Activity Reports (“SARs”). The SEC is not only willing to penalize a broker-dealer or its compliance personnel who fail to file timely SARs, but is also willing to charge individuals and entities that contribute to or cause AML failures.

Continue reading →