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Key Takeaways from AML 2023

An effective anti-money laundering program is a critical tool to fight financial crime and protect the integrity of the capital markets and global financial system. 

For more than two decades, industry leaders have gathered securities industry professionals with regulators at SIFMA’s Anti-Money Laundering & Financial Crimes Conference. This conference is a core, fundamental offering at SIFMA and vital to what we do, serving as a forum to protect our markets from illicit financial activity. 

In 2023, more than 400 professionals convened in New York City to share information and best practices. Three key themes arose from our discussions: 

  1. The Threat Landscape: As financial institutions crack down, bad actors will find new ways to commit financial crimes. Law enforcement has a specific and aggressive focus on facilitators of money laundering, including professional money launderers and complicit financial institutions. 
  2. The Regulatory Landscape: We are in the midst of implementing the most significant regulatory updates in decades. Staying true to its intent, a modernized regulatory infrastructure will enable the financial industry to efficiently provide highly useful information to authorities and aid in the fight against illicit financial activities. 
  3. The Reporting Landscape: Suspicious Activity Reports (SARs) continue to be the number one tool for law enforcement to track financial crime. The number of filings has increased over the past three years and now stands at 1.6 million filed every year. 

The Threat Landscape 

Pointing to Treasury’s most recent National Risk Assessments for Money Laundering, Terrorist Financing, and Proliferation Financing (March 2022), Treasury’s Deputy Assistant Secretary for Strategic Policy Scott Rembrandt outlined the current threat landscape and noted how much has changed since the prior report in 2020. “Fraud dwarfs all other proceed-generating crimes that are laundered in or through the United States,” the report states. Current threats include COVID-stimulus related fraud, the rise in ransomware attacks, more cyber-enabled crime, the rise in digital payments, domestic violent extremism, corruption, the increasing toll of the fentanyl epidemic and more. 

Rembrandt expects the next report to be published in January 2024; it will delve into increasing types of fraud, including healthcare, telemedicine, elder care and opioid abuse frauds. Matthew Taylor, Supervisory Special Agent for the FBI’s Complex Financial Crimes Program, reiterated the elder fraud threat and initiatives to protect this “highly-targeted” group. 

Taylor categorized recent money laundering trends into four categories: the financial system, trade-based money laundering, real estate, and virtual currency. Although virtual currency is hotly discussed, the three former categories remain by far the most prevalent sources of money laundering. Of note, broker-dealers are typically more likely to see account takeovers or securities fraud than the drug trafficking and organized crime seen by traditional banks. 

Despite the unprecedented use of sanctions, Russia has found ways to continue financing its oligarchs and government throughout the Ukrainian conflict. “It’s quite clear a number of vulnerabilities in our own AML/CFT system have been taken advantage of, including gatekeepers and that’s something we’re increasingly focused on,” said Rembrandt.  

Treasury’s Office of Foreign Assets Control (OFAC) has an invaluable email alert to stay on top of sanctions and related developments; you can sign up here. 

The Regulatory Landscape  

The AML Act of 2020, considered the most significant piece of legislation since the USA PATRIOT Act of 2001, mandated a complete rethink of the regulatory landscape. FinCEN has been tasked with its implementation and the industry remains hopeful that it will be faithful to Congress’ intent to eliminate cumulative and burdensome regulations that drain limited resources from focusing on the most important illicit finance risks faced by the U.S. financial system. 

Beneficial Ownership Information Reporting requirements are the first to go live on January 1, 2024. Rembrandt noted that FinCEN and Treasury are currently working through the approximately 80 comments (including from SIFMA) that have been received to determine a final Access Rule, while simultaneously building the associated database and developing guidance for businesses that will have to comply with the legal obligations.  

Treasury and FinCEN are also starting work on the final rulemaking piece of the puzzle, which will be changing the CDD Rule so it complies with the Corporate Transparency Act (CTA). Proposed revisions are expected in the fall. 

Several more proposals and final rules are expected this year while regulators – including the SEC, FINRA and FinCEN – are ingesting a significant amount of intelligence, and analytics are being run to find red flags. Ultimately, financial firms must have a modern and reasonably designed AML program, good control over data and procedures, and ensure compliance with their own policies. Training and awareness, including robust Know Your Customer (KYC) processes, remain key to preventing illicit activity. 

The Reporting Landscape 

Financial institutions, trade corporations, regulators – all of us have different vantage points in the landscape for financial crime and by working together we will have a richer response to combat illicit activity. SARs remain the most valuable tool to further collaboration. 

SARs serve as intelligence for the law enforcement community, providing proactive leads and also reactive case support; the FBI has direct access to them via FinCEN. Investigations have been initiated in every prosecutable category, including criminal, national security, and cyber matters. 

The Number of SARs Filed is Increasing: 

  Depository Institutions  Securities/Futures 
2020  1,211,344  38,236 
2021  1,426,741  58,951 
2022  1,676,171  57,059 

Source: FBI 

“These SARs are beyond important to us,” said Taylor, and a perfect SAR can be just one well-written paragraph (an entire breakout session at the Conference was dedicated to writing tips). Another simple but incredibly effective tip: if you have been in contact with a law enforcement agency, put that contact on the SAR – it is a critical management tool. 

Taylor stressed that the FBI has 56 field offices; contact your local office to schedule a granular discussion for your organization. 

The Industry View 

Saima Ahmed, Executive Vice President and General Counsel summarized the financial industry’s efforts and SIFMA’s work on behalf of our members. The following is an excerpt from her prepared remarks: 

Saima Ahmed opens the SIFMA AML 2023 Conference in NYC

“Some things have changed, and some things have not since last year’s conference. What has changed? Beneficial ownership information reporting goes live on January 1, 2024, which is the first of many rulemakings under the AML Act of 2020. We expect several more final rules or proposals this year, which we will hear more about during this conference. The purpose of these rulemakings is, in part, to modernize layered upon layered and outdated regulations so that you can focus limited resources efficiently and provide highly useful information to authorities combating illicit financial activities. SIFMA is here to advocate for you before regulators to ensure that this goal is met. 

Now, what hasn’t changed. Russia’s war against Ukraine is ongoing, and the U.S., United Kingdom, and European Union continue to impose sanctions, with a focus now on enforcement and sanctions evasion. It has not been an easy year dealing with unprecedented complexity and volume of sanctions, and I want to thank everyone in this room doing their part to hamper Russia’s war effort and realize the costs of their invasion. 

Bad actors finding new ways to commit financial crimes also has not changed, which might be why you are here today to share information with your peers. And you all continue to devote time, diligence, and resources to protecting our financial system.  

And the focus on digital assets continues as regulators continue to assess how to regulate them amidst significant enforcement activity. As events over this past year demonstrated, there are significant regulatory gaps that exist in the evolving market for digital asset products and services. It is crucial that regulators act in a thoughtful yet expeditious manner to clarify which existing rules or guidance should apply to these asset classes.  

From an illicit finance and sanctions evasion perspective, the threat from bad actors is very real. Luckily, the firms in this room have built and honed their AML/CFT programs and KYC practices since the enactment of the BSA over 50 years ago. You have substantial experience implementing risk-based controls adapted to your business models and client base, expertise incorporating new technologies, and resources and talent to implement robust compliance programs, essential to the novel illicit finance risks posed by digital assets. Should your firm engage in this business, financial institutions are already in the best position to deal with illicit finance risks posed by digital assets. SIFMA provides this forum to discuss and understand the nuances of the digital asset market so that you can tailor your AML programs to this business. 

As this new market demonstrates, we all must work together—the public sector, regulators, and industry—to ensure regulatory requirements effectively mitigate risk and to stay ahead of those seeking to exploit our financial system.” 

Conference Planning Task Force 

More than 20 years ago, a group of industry leaders pioneered SIFMA’s involvement in the anti-money laundering and financial crimes space. Our 2023 Conference Planning Task Force, on which I also have the pleasure of serving, has once again made this conference the industry’s premier gathering through their dedication and collective expertise. With gratitude for their service to SIFMA, the industry, and the markets, I would like to recognize: 

2023 SIFMA Anti-Money Laundering & Financial Crimes Committee Co-Chairs 

2023 Conference Planning Task Force 

  • Jim Fiebelkorn, BSA/AML Program and Sanctions, Charles Schwab & Co and Charles Schwab Bank 
  • Sarah Green, Global Head of Financial Crimes, Vanguard Group Inc. 
  • Adrienne Kosta, Head of Financial Crimes Program Office, Fidelity Investments 
  • Samantha J. Leventhal, Managing Director, Global Financial Crimes Global Wealth & Investment Management and Global Markets Risk Executive, Bank of America 
  • Tara Loftus, Global Head of Financial Crimes Compliance, Brown Brothers Harriman 
  • Robert Molloy, Chief AML Officer, Raymond James Financial 
  • Jeffrey Weiss, Head of Financial Crimes, Robinhood Financial LLC 
  • Alan Williamson, Director, Business Oversight Compliance, Barclays Investment Bank Americas 
  • Meg Zucker, VP US Head of AML & Financial Crime Advisory, RBC 
  • Bernard Canepa, Managing Director and Associate General Counsel, SIFMA 

For more, please see our recent post on Hot Topics in AML and Financial Crime for Broker-Dealers. It includes in-depth discussion on topics including the AML Act of 2020 and CTA; Beneficial Ownership Reporting; AML for Investment Advisers; Marijuana and Broker-Dealers; Digital Assets; and Fraud. 

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Bernard Canepa is a Managing Director and Associate General Counsel in SIFMA’s Office of General Counsel, where he works on a variety of legal and policy issues, including anti-money laundering and financial crime compliance. He monitors and keeps SIFMA members apprised of relevant developments, engages in ongoing dialogue with regulators, and advocates industry positions. Bernard joined SIFMA in March 2016. Prior to that, he worked at FINRA for over seven years. Bernard has an undergraduate degree in foreign affairs from the University of Virginia and a law degree from the University of Miami. 

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