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ICIJ, the investigative group of journalists behind the so-called FinCEN Files, the massive leakage of banks’ suspicious activity reports (SARs), has pointed out that a new database aimed at addressing regulatory gaps in the US anti-money laundering (AML) framework is “taking way too long”.
“There is a lot of anxiety that the Biden administration will take the whole four years to finalize the rules setting up the beneficial ownership registry,” the ICIJ cited Elise Bean, an anti-corruption expert and former chief counsel of the US Senate, as saying.
“It is hard to understand what is taking so long,” Bean stressed.
The FinCEN Files, published by ICIJ and more than 100 media outlets in September 2020, exposed more than $2trn worth of suspicious transactions flowing through the global financial system. It also revealed US banks’ role in letting the dirty money move.
Following the scandal, in January 2021, Congress passed the historic Anti-Money Laundering Act (AMLA) with sweeping measures aimed at addressing regulatory gaps highlighted by the group of journalists.
One of the key provisions in the AMLA tasks the Treasury’s Financial Crimes Enforcement Network (FinCEN) with establishing a beneficial ownership register.
The first set of rules, concerning the reporting of beneficial ownership information, was due to be issued by the end of 2021. The agency, however, proposed rules with a significant delay last December, which have still not been finalised.
The comment period on the draft rules closed in February and the agency said it had received more than 230 comments.
According to ICIJ, a FinCEN spokesperson told the group that FinCEN submitted the final draft in late August to the Office of Management and Budget, which must review the rule before it becomes final.
“This is all taking way too long, much longer than expected, and FinCEN underfunding slowed the process,” Gary Kalman, the director of Transparency International’s US office, is quoted by the ICIJ as saying.
FinCEN has been facing various challenges to meet the statutory deadlines. Right after AMLA became law, there was a transition to a new presidential administration and half a year later there was a leadership change at FinCEN.
In addition, while FinCEN was dealing with significant funding constraints, many provisions of the AMLA require rulemakings or periodic reporting to Congress on its implementation efforts, assessments and findings.
For instance, in line with AMLA, FinCEN set first-ever national anti-money laundering/counter-terrorism financing (AML/CTF) priorities, published suspicious activity statistics for money services businesses, announced draft rules for a SAR sharing pilot programme and launched a review of existing regulations and guidance to streamline and modernise the AML/CTF regime.
“FinCEN got a bump in funding this year, but more is needed,” Kalman told ICIJ.
“Still, they should be able to complete this rulemaking process.”
The delay in FinCEN’s work has not remained unnoticed in Congress.
In early November, when it became apparent that FinCEN would be unable to meet the statutory deadline, lawmakers wrote to the agency.
Legislators said they were disappointed by the delays, and reiterated their push for FinCEN to implement the rules as broad as possible.
Senate banking chair Sherrod Brown (D-OH), House Financial Services Committee chairwoman Maxine Waters (D-CA) and House Oversight Committee chairwoman Carolyn Maloney (D-NY) emphasised that Congress “intended for the [law] to be interpreted and implemented broadly and flexibly, and in a manner that evolves to address new strategies that sophisticated criminals employ to hide and launder their illicit assets”.
The rulemaking on the reporting requirements for the beneficial ownership register is only the first in a series of rulemakings that FinCEN has to complete before it can actually set up the register.
As the next step in the rulemaking series, FinCEN will have to publish proposed rules on access and disclosure requirements for the register. According to the agency, this is anticipated to take place this year.
