The US Department of the Treasury recently issued the 2022 National Strategy for Combatting Terrorist and Other Illicit Financing (Strategy 2022) to explore ways to improve transparency in the US financial system and strengthen the US anti-money laundering/counter the financing of terrorism (AML/CFT) framework. The Strategy 2022 was also published to better enable the US government and US financial institutions to address the evolving challenges to the illicit finance risk environment caused by the Covid-19 pandemic, which include a rise in ransomware attacks and domestic violent extremism, increased digitization of payments and financial services, and an overall increase in the levels of corruption and fraud. Illicit finance risks have also most recently been impacted by Russia’s war against Ukraine and the resulting international sanctions that have been imposed to hinder the war efforts.
In addition to discussions on key threats and vulnerabilities in the US financial system, the Strategy 2022 recommends four priorities and fourteen corresponding supporting actions to address the most significant illicit finance risks. The four priority recommendations include:
1. Increased transparency and the closure of legal and regulatory gaps in the ALM/CFT framework;
2. Improvements to the efficiency and effectiveness of AML/CFT framework for financial institutions;
3. Enhancing the operational effectiveness of law enforcement and international partnerships in combatting illicit finance; and
4. Supporting technological innovation and using it to mitigate illicit finance risks.
The Strategy 2022 also covers several legislative and regulatory actions aimed at combatting illicit finance risks that are already in progress, including efforts to enhance the transparency of company formation and real estate purchases; the application of AML/CFT requirements to previously uncovered financial institutions, professions and sectors; and the application of certain regulatory requirements on virtual asset activities.
The Office of Foreign Assets Control recently took action in line with Strategy 2022 recommendations. On May 8, 2022, OFAC prohibited US persons from providing accounting, trust and corporate formation, or management consulting services to persons in the Russian Federation, and also made persons operating in these service sectors eligible for sanctions in the future.