U.S. Efforts to Combat Money Laundering, Terrorist Financing, and Other Illicit Financial Threats: An Overview




Updated January 4, 2022
U.S. Efforts to Combat Money Laundering, Terrorist Financing,
and Other Illicit Financial Threats: An Overview

The United States maintains a multifaceted policy regime
cooperation through global standard setting, cross-border
for tackling anti-money laundering (AML), combating the
information sharing, AML assessment and monitoring, and
financing of terrorism (CFT), and countering illicit financial
AML technical assistance.
threats. Key issues for the 117th Congress may include
oversight of the U.S. government’s legal, regulatory,
Some entities, such as the Financial Action Task Force and
enforcement, and diplomatic AML/CFT effort—with
the Basel Committee on Banking Supervision, provide
special focus on the Biden Administration’s implementation
standard-setting guidance relevant to AML matters. Others,
of significant changes to the AML/CFT regime enacted as
such as the Egmont Group of Financial Intelligence Units
part of the William M. (Mac) Thornberry National Defense
and the International Criminal Police Organization,
Authorization Act FY2021 (NDAA; P.L. 116-283).
contribute to the implementation of such standards through
information sharing. The United Nations Office of Drugs
Background
and Crime, the World Bank, and the International Monetary
Misuse of the international financial system, including for
Fund also maintain capabilities to monitor and assess
the purposes of money laundering and terrorist financing,
national AML policies and provide technical assistance on
can result in significant economic, political, and security
AML capacity-building priorities. Other international and
consequences at both national and international levels.
regional organizations—including the Organisation for
Money laundering, which broadly refers to the process of
Economic Co-operation and Development, the G-20, and
disguising financial assets so they can be used without
the Organization of American States—have working groups
revealing their underlying illicit source or nature (e.g.,
and initiatives focused on various AML matters.
proceeds of fraud, corruption, and contraband trafficking),
is globally ubiquitous. Terrorist financing, a key global
Statutory Framework
security concern, refers to the process of fundraising,
In the United States, the legislative foundation for domestic
through both licit and illicit means, and financially
AML regulation originated in 1970 with the Bank Secrecy
sustaining terrorist groups. Other illicit financial threats
Act (BSA; P.L. 91-508) and its major component, the
span a wide range of concerns, including proliferation
Currency and Foreign Transactions Reporting Act.
finance, tax evasion, sanctions evasion, and the financial
Amendments to the BSA and related provisions in the
facilitation of other state and nonstate threat actors.
1980s and 1990s expanded AML policy tools available to
combat crime—particularly drug trafficking—and prevent
Despite recent AML efforts in the United States,
criminals from laundering their illicitly derived profits.
policymakers face challenges in their ability to counter
money laundering effectively. Those include the diversity
Key elements to the BSA’s AML framework, which are
of illicit methods to move and store ill-gotten proceeds
codified in Titles 12 (Banks and Banking) and 31 (Money
through the international financial system (e.g., trade-based
and Finance) of the U.S. Code, include requirements for
money laundering and misuse of anonymous shell
customer identification, recordkeeping, reporting, and
companies); the introduction of new and emerging threats
compliance programs intended to identify and prevent
(e.g., cyber-enabled financial crimes); the ongoing use of
money laundering. Substantive criminal statutes in Titles 31
old methods (e.g., bulk cash smuggling); gaps in legal,
and 18 (Crimes and Criminal Procedures) of the U.S. Code
regulatory, and enforcement regimes, including uneven
prohibit money laundering and related activities and
availability of international training and technical assistance
establish civil and criminal penalties and forfeiture
for AML purposes; the rise of new payment technologies,
provisions. Federal authorities have also applied
such as cryptocurrency; and costs associated with financial
administrative forfeiture, nonconviction-based forfeiture,
institution compliance with global AML laws.
and criminal forfeiture tools to combat money laundering.
International Framework
In response to the September 11, 2001, terrorist attacks,
Given the global nature of the international financial system
Congress expanded the BSA’s AML framework to add
and the transnational criminal activity that attempts to
provisions to combat the financing of terrorism through the
exploit it, the United States and other countries have
USA PATRIOT Act (P.L. 107-56). This provided the
engaged in a variety of international efforts designed to
executive branch with greater authority and additional tools
improve global AML responses and build international
to counter the convergence of illicit threats, including the
cooperation and information sharing on AML issues,
financial dimensions of organized crime, corruption, and
including through formal bilateral requests for mutual legal
terrorism. More recently, the Anti-Money Laundering Act
assistance on financial crime investigative matters. Multiple
of 2020 (AMLA), in Division F of the FY2021 NDAA,
international organizations contribute to international AML
provided for wide-ranging updates to the BSA.
https://crsreports.congress.gov

U.S. Efforts to Combat Money Laundering, Terrorist Financing, and Other Illicit Financial Threats: An Overview
Regulatory Framework
Cryptocurrency. The act amends the BSA’s definition
The BSA’s AML framework is premised on banks and
of monetary instrument to include “value that substitutes
other covered financial entities filing a range of reports with
for monetary instrument.” Similarly, it amends the
Treasury’s Financial Crimes Enforcement Network
BSA’s definitions of financial institution and money
(FinCEN) when their clients engage in suspicious financial
transmitter to include businesses exchanging or
activity, large cash transactions, or certain other financial
transmitting “currency, funds, or value that substitutes
behavior. The accurate, timely, and complete reporting of
for currency or funds.”
such activity to FinCEN flags situations that may warrant
Whistleblower protections and BSA penalties. The
further investigation by law enforcement. Other reports
act establishes additional protections for whistleblowers,
must be submitted to FinCEN by individuals transporting
enhanced penalties for BSA violators, and a new
large amounts of cash internationally, persons with certain
prohibition on the concealment of the sources of assets
foreign financial accounts, and nonfinancial entities
in monetary transactions. It also eliminated the previous
conducting large cash transactions.
cap on AML whistleblower awards.
Treasury support and staffing. The act authorizes
Federal financial institution regulators—including the
additional funds for FinCEN and Treasury’s Office of
Federal Reserve, the Federal Deposit Insurance
Technical Assistance. Among other provisions, the act
Corporation, the National Credit Union Administration, and
expands Treasury’s attaché program; and establishes an
the Office of the Comptroller of the Currency—conduct
interagency personnel rotation program, foreign
oversight and examine entities under their supervision for
financial intelligence unit liaisons, BSA information
compliance with BSA/AML requirements. These regulators
security officers, and a FinCEN “analytical hub.”
are responsible for the safety-and-soundness examinations
of the institutions they supervise and generally conduct
Pending FinCEN Rulemakings
BSA examinations concurrently with those routine
FinCEN is contemplating several expansions and
inspections. When there is cause to do so, any of the
modifications to the BSA’s AML framework, some
regulators may carry out a special BSA examination.
prompted by AMLA requirements.
Enforcement actions for AML violations may result in civil
Beneficial ownership. Following an earlier advance
and/or criminal penalties. Other federal agencies with AML
notice of proposed rulemaking (ANPRM) in April 2021,
responsibilities include the Securities and Exchange
FinCEN released a notice of proposed rulemaking
Commission and the Commodity Futures Trading
(NPRM) to implement the beneficial ownership
Commission. The Internal Revenue Service also enforces
reporting requirements under AMLA. As proposed,
BSA compliance, particularly for nonbank financial
FinCEN would require covered entities to file reports
institutions not regulated by other federal agencies, such as
identifying individuals who are beneficial owners and
money service businesses, casinos, and charities.
individuals filing applications with governmental
Recent Developments
authorities to form or register the entity.
Antiquities, real estate, and BSA modernization. As
AMLA Implementation
part of efforts to implement AMLA provisions, FinCEN
issued an ANPRM to apply AML requirements on the
As noted above, the AMLA enacted key changes to the
trade in antiquities in September 2021 and one to
BSA/AML regime.
address real estate money laundering in December 2021.
Corporate Transparency Act. A component of the
Separately in December, FinCEN issued a request for
AMLA, the Corporate Transparency Act (Title LXIV of
information on how to “streamline, modernize, and
Division F of the FY2021 NDAA) requires those
update” the U.S. AML regime.
forming certain new legal entities, and certain existing
Cryptocurrencies and digital assets. In December
entities, to provide FinCEN with identifying information
2020, prior to the AMLA’s enactment, FinCEN issued
about their beneficial owners. (Covered beneficial
an NPRM on cryptocurrency and digital asset
owners is defined, in part, to mean persons who directly
transaction reporting and recordkeeping requirements
or indirectly own 25% or more of a legal entity or
similar to those for currency transactions. In January
exercise “substantial control” over it.) Covered entities
2021, FinCEN extended the comment period for the
must update information as it changes. FinCEN must
proposal.
store the information in a nonpublic database for at least
five years and allow various U.S. government entities
FY2022 NDAA
and financial institutions to access the information,
Several provisions of the FY2022 NDAA (P.L. 117-81)
subject to certain terms. Under the act, penalties for
address AML concerns, including with respect to Russian
unauthorized disclosure of this information to the public
money laundering (Section 6106), the delegation of BSA
are severe.
examination authority (Section 6107), and updates to the
BSA mission and information sharing. The act
National Strategy for Combating Terrorist and Other Illicit
broadens the mission of the BSA to safeguard national
Financing (Section 6506).
security-related dimensions of financial crime, including
terrorist financing. It also enhances feedback
Rena S. Miller, Specialist in Financial Economics
opportunities among financial institutions, regulators,
Liana W. Rosen, Specialist in International Crime and
and law enforcement related to BSA/AML priorities and
Narcotics
expands options for data sharing among and within
financial institutions and their components.
IF11064
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U.S. Efforts to Combat Money Laundering, Terrorist Financing, and Other Illicit Financial Threats: An Overview


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https://crsreports.congress.gov | IF11064 · VERSION 6 · UPDATED