House Bill To “Modernize” FinCEN’s Special Measure Authorities – Finance and Banking


United States: House Bill To “Modernize” FinCEN’s Special Measure Authorities

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The America COMPETES Act of 2022 (Full name: “The America Creating Opportunities for Manufacturing Pre-Eminence in Technology and Economic Strength”) was introduced in the US House of Representatives. The bill would, among other things, modernize FinCEN’s special-measures authority to “empower FinCEN to adapt its existing tools, monitor and obstruct global financial threats, and meet the challenges of combating 21st century crime.”

The bill states that innovations in financial services – such as digital assets and informal value transfer systems – have “transformed and expanded” international business since FinCEN was given its special-measures authority 20 years ago. Further, the bill asserts that while innovations are “useful to legitimate consumers,” they are a “boon for bad actors,” enabling perpetrators to attack US companies with ransomware and using the financial system to “move and obscure the proceeds of their crimes. “

The bill would allow the Secretary of the Treasury to “prohibit, or impose conditions upon certain transmittals of funds” to or from any domestic financial institution or domestic financial agency if the Secretary finds that the transmittal involves:

  • a foreign jurisdiction of primary money laundering concern;

  • one or more types of accounts within, or involving, a foreign jurisdiction of primary money laundering concern; gold

  • one or more classes of transactions within, or involving, a foreign jurisdiction of primary money laundering concern.

Commentary

In 2001, the USA PATRIOT Act gave Treasury the authority to impose five “special measures” upon US financial institutions when Treasury determines that an account, transaction, foreign financial institution, or foreign jurisdiction is “of primary money laundering concern.” Most of the “special measures” create information gathering and reporting obligations for US financial institutions. But the fifth and strongest “special measure” permits Treasury to place prohibitions or conditions on the operation of correspond accounts and payable-through accounts.

This proposed legislation points out, correctly, that the world has changed since 2001: while the vast majority of cross-border payments passed through correspond and payable-through accounts 20 years ago, a significant number of cross-border payments today may not.

In particular, cryptocurrency, even when intermediated by a US financial institution, is used in cross-border payments that do not pass through a correspond or payable-through account. The draft legislation seeks to address that gap. In the past year alone, there has been a massive increase in cryptocurrency-denominated ransomware payments and stepped-up interest from regulators. In that context, Treasury might welcome the proposed legislation’s broader grant of authority to “prohibit, or impose conditions upon certain transmittals of funds,” a term that federal agencies have interpreted to include cryptocurrency.

Primary Sources

  1. House Financial Services Committee Press Release: America COMPETES Act Contains Key Provisions Authored by Committee Democrats

  2. House.gov: America COMPETES Act of 2022

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