Updated June 9, 2021
U.S. Efforts to Combat Money Laundering, Terrorist Financing,
and Other Illicit Financial Threats: An Overview
The United States maintains a multifaceted policy regime
Key elements to the BSA’s AML legal framework, which
for tackling anti-money laundering (AML), combating the
are codified in Titles 12 (Banks and Banking) and 31
financing of terrorism (CFT), and countering other forms of
(Money and Finance) of the U.S. Code, include
illicit financial threats. Key issues for the 117th Congress
requirements for customer identification, recordkeeping,
may include oversight of the U.S. government’s robust
reporting, and compliance programs intended to identify
legal, regulatory, enforcement, and diplomatic AML/CFT
and prevent money laundering. Substantive criminal
effort—with special focus on the Biden Administration’s
statutes in Titles 31 and 18 (Crimes and Criminal
implementation of significant changes to the AML/CFT
Procedures) of the U.S. Code prohibit money laundering
regime that were enacted as part of the FY2021 National
and related activities and establish civil and criminal
Defense Authorization Act (NDAA; P.L. 116-283).
penalties and forfeiture provisions. Federal authorities have
also applied administrative forfeiture, nonconviction-based
Background
forfeiture, and criminal forfeiture tools to combat money
Misuse of the international financial system, including for
laundering.
the purposes of money laundering and terrorist financing,
can result in significant economic, political, and security
In response to the September 11, 2001, terrorist attacks,
consequences at both national and international levels.
Congress expanded the BSA’s AML policy framework to
Money laundering, which broadly refers to the process of
incorporate additional provisions to combat the financing of
disguising financial assets so they can be used without
terrorism through the USA PATRIOT Act (P.L. 107-56).
revealing their underlying illicit source or nature (e.g.,
This provided the executive branch with greater authority
proceeds of fraud, corruption, and contraband trafficking),
and additional tools to counter the convergence of illicit
is globally ubiquitous. Terrorist financing, a key global
threats, including the financial dimensions of organized
security concern, refers to the process of fundraising,
crime, corruption, and terrorism. Most recently, the Anti-
through both licit and illicit means, and financially
Money Laundering Act of 2020 (Division F of the FY2021
sustaining terrorist groups. Other illicit financial threats
NDAA) provided for a wide-ranging update to the BSA and
span a wide range of concerns, including proliferation
establishes a system in which many small and medium-
finance, tax evasion, sanctions evasion, and the financial
sized legal entities must disclose information about their
facilitation of malign threat actors.
beneficial owners to the U.S. Department of the Treasury.
Despite robust AML efforts in the United States,
Regulatory Framework
policymakers face challenges in their ability to counter
The BSA’s AML framework is premised on banks and
money laundering effectively, including the diversity of
other covered financial entities filing a range of reports with
illicit methods to move and store ill-gotten proceeds
Treasury’s Financial Crimes Enforcement Network
through the international financial system (e.g., trade-based
(FinCEN) when their clients engage in suspicious financial
money laundering and misuse of anonymous shell
activity, large cash transactions, or certain other financial
companies); the introduction of new and emerging threats
behavior. The accurate, timely, and complete reporting of
(e.g., cyber-enabled financial crimes); the ongoing use of
such activity to FinCEN flags situations that may warrant
old methods (e.g., bulk cash smuggling); gaps in legal,
further investigation by law enforcement. Other reports
regulatory, and enforcement regimes, including uneven
must be submitted to FinCEN by individuals transporting
availability of international training and technical assistance
large amounts of cash internationally, persons with certain
for AML purposes; the rise of new payment technologies,
foreign financial accounts, and nonfinancial entities
such as cryptocurrency; and costs associated with financial
conducting large cash transactions. In December 2020,
institution compliance with global AML laws.
FinCEN proposed a new rule on cryptocurrency and digital
asset transaction reporting and recordkeeping requirements
Legal Framework
similar to those for currency transactions.
In the United States, the legislative foundation for domestic
AML regulation originated in 1970 with the Bank Secrecy
Federal financial institution regulators—including the
Act (BSA; P.L. 91-508) and its major component, the
Federal Reserve, the Federal Deposit Insurance
Currency and Foreign Transactions Reporting Act.
Corporation, the National Credit Union Administration, and
Amendments to the BSA and related provisions in the
the Office of the Comptroller of the Currency—conduct
1980s and 1990s expanded AML policy tools available to
oversight and examine entities under their s upervision for
combat crime—particularly drug trafficking—and prevent
compliance with BSA/AML requirements. These regulators
criminals from laundering their illicitly derived profits.
are responsible for the safety-and-soundness examinations
of the institutions they supervise and generally conduct
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U.S. Efforts to Combat Money Laundering, Terrorist Financing, and Other Il icit Financial Threats: An Overview
BSA examinations concurrently with those routine
for monetary instrument.” Similarly, it amends the
inspections. When there is cause to do so, however, any of
BSA’s definitions of financial institution and money
the regulators may carry out a special BSA examination.
transmitter to include businesses exchanging or
Enforcement actions for AML violations may result in civil
transmitting “currency, funds, or value that substitutes
and/or criminal penalties. Other federal agencies with AML
for currency or funds.” These changes are seen as
regulatory responsibilities include the Securities and
codifying FinCEN’s BSA authorities over various
Exchange Commission and the Commodity Futures Trading
cryptocurrencies and digital assets.
Commission. The Internal Revenue Service also enforces
Reporting requirements. The act requires the Secretary
compliance with BSA requirements, particularly for
of the Treasury to review existing BSA requirements
nonbank financial institutions not regulated by other federal
and consider options related to streamlining and
agencies, such as money service businesses, casinos, and
automating certain reports, as well as modernizing other
charities.
relevant regulations and guidance. It requires a review
and strategy to address financial services de-risking
International Framework
concerns. The act also adds antiquities dealers to the list
Given the global nature of the international financial system
of financial institutions subject to BSA coverage.
and the transnational criminal activity that attempts to
Whistleblower protections and BSA penalties. The
exploit it, the United States and other countries have
act establishes additional protections for whistleblowers,
engaged in a variety of international efforts designed to
additional penalties for BSA violators, and a new
improve global AML responses and build international
prohibition on the concealment of the sources of assets
cooperation and information sharing on AML issues,
in monetary transactions. It bars those found to have
including through formal bilateral requests for mutual legal
committed serious BSA violations from serving on
assistance on financial crime investigative matters. Multiple
boards of U.S. financial institutions for 10 years.
international organizations contribute to international AML
Treasury support and staffing. The act authorizes an
cooperation through global standard setting, cross-border
additional $10 million for FinCEN operations and $60
information sharing, AML assessment and monitoring, and
million annually through FY2024 for Treasury’s Office
AML technical assistance.
of Technical Assistance. The act further provides special
hiring authority to Treasury’s Office of Terrorism and
Some entities, such as the Financial Action Task Force and
Financial Intelligence; expands Treasury’s attaché
the Basel Committee on Banking Supervision, provide
program; and establishes an interagency AML/CFT
standard-setting guidance relevant to AML matters. Others,
personnel rotation program, foreign financial
such as the Egmont Group of Financial Intelligence Units
intelligence unit liaisons, BSA information security
and the International Criminal Police Organization,
officers, and a FinCEN “analytical hub.”
contribute to the implementation of such standards through
information sharing. The United Nations Office of Drugs
Beneficial Ownership Transparency
and Crime, the World Bank, and the International Monetary
Beneficial ownership refers to the natural person who
Fund also maintain capabilities to monitor and assess
invests in, controls, or otherwise benefits from an asset,
national AML policies and provide technical assistance on
such as a bank account, real estate, company, or trust. In the
AML capacity-building priorities. Other international and
United States, corporations and limited liability companies
regional organizations—including the Organisation for
are formed at the state level, and most states do not collect,
Economic Co-operation and Development, the G-20, and
verify, or update identifying information on their beneficial
the Organization of American States—have working groups
owners. This gap in the U.S. AML regime was a source of
and initiatives focused on various AML matters.
long-standing international criticism. The act requires those
forming certain new legal entities, and certain existing
Recent Developments
entities, to provide FinCEN with identifying information
This section highlights key changes to the BSA/AML
about their beneficial owners. Covered beneficial owners is
regime enacted by the AML Act of 2020.
defined, in part, to mean persons who directly or indirectly
own 25% or more of a legal entity or exercise “substantial
BSA mission and information sharing. The act
control” over it. Covered entities must update information
broadens the mission of the BSA to safeguard national-
as it changes. FinCEN must store the information in a non-
security-related dimensions of financial crime, including
public database for at least five years and allow various
terrorist financing. It also enhances feedback
U.S. government entities and financial institutions to access
opportunities among financial institutions, regulators,
the information, subject to certain terms. Under the act,
and law enforcement related to BSA/AML priorities and
penalties for unauthorized disclosure of this information to
expands options for data sharing among financial
the public are severe, though some countries store such
institutions. To that end, the act directs the Treasury
information in public registries.
Department to establish a pilot program allowing
financial institutions to share certain information with
Rena S. Miller, Specialist in Financial Economics
their foreign branches, subsidiaries, and affiliates.
Liana W. Rosen, Specialist in International Crime and
Technology innovation. The act encourages financial
Narcotics
institutions to explore technology solutions, such as
artificial intelligence, for BSA/AML compliance.
IF11064
Cryptocurrency. The act amends the BSA’s definition
of monetary instrument to include “value that substitutes
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U.S. Efforts to Combat Money Laundering, Terrorist Financing, and Other Il icit Financial Threats: An Overview
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https://crsreports.congress.gov | IF11064 · VERSION 5 · UPDATED