US Lawmakers Call for ‘War-like Footing’ Against AML

US lawmakers Tom Malinowski and Sheldon Whitehouse have written to Treasury Secretary Janet Yellen asking her to impose a “war-like footing” in the US Treasury Department to combat money laundering, corruption and kleptocracy.

The letter notes that the Treasury has the authority to rapidly expand AML obligations, which has been recommended for decades by law enforcement, anti-corruption watchdogs, and the FATF (Financial Action Task Force).

“With beneficial ownership reform on its way, the top policy priority in the fight against dirty money should now become the expansion of AML obligations to cover financial facilitators and professional service providers that can enable corruption.”

The letter notes that more than USD 13 trillion is reported to be invested in US-based private equity and hedge funds, which are subject to very little ownership or money laundering vetting.

“In other words, foreign kleptocrats could launder millions into our communities through a hedge fund’s advisors and no one would be able to know,” it says.

The letter urges Yellen to expand AML and suspicious activity reporting obligations to investment advisors, including private equity and hedge fund advisors, and potentially family offices, venture capital firms, and funds with less than USD 100 million under management.

It also calls for the revocation of exemptions from Patriot Act AML rules for ten sectors, so as to cover real estate professionals and sellers of yachts and airplanes, among others.

Treasury must also make a consider whether lawyers, accountants, company formation agents, and art dealers should also fall under the same obligations as financial institutions, it says.

The letter also calls for the recently mandated beneficial ownership registry to be implemented in a way that limits exemptions and broadens reporting requirements.

“Internationally, Treasury should lead a landmark international agreement to end offshore financial secrecy and illicit tax havens once and for all,” it says, calling for international agreements around public beneficial ownership registries.

The letter also calls for a harmonising of the US and OECD regimes for the exchange of tax information (FATCA and AEOI, respectively), as well as for steps to be taken towards a global asset register and cross-border payments database.

A national corruption risk assessment should be published and incorporated in the inaugural National Strategic AML Priorities that is statutorily mandated to be issued by FinCEN by 30 June.