New frontier for bank secrecy act prosecutions: Trade-Based Money Laundering


July 14 2016

Since the September 11, 2001, terrorist attacks, U.S. law enforcement and financial regulatory agencies have focused on disrupting the use of the financial system by terrorist groups, criminal organizations and tax evaders to hide illicit funds. As part of these efforts, the Department of Justice (DOJ) and the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) have been increasingly scrutinizing anti-money laundering (AML) compliance efforts and pursuing domestic and foreign banks for violations of the Bank Secrecy Act. Because of this heightened enforcement environment and due to the tremendous recent growth of trade-based money laundering, financial institutions should expect a surge in government investigations, and potentially prosecutions, for failures to maintain adequate trade-finance AML compliance programs.

With an estimated 80 percent of the world’s illicit money flow stemming from trade-related activities, AML regulators and prosecutors are progressively turning their enforcement focus to trade-based money laundering (TBML) and scrutinizing financial institutions’ trade-finance compliance programs for potential AML violations. As authorities are continuing to take an increasingly tougher stance on banks’ failures to comply with the Bank Secrecy Act (BSA), domestic and foreign financial institutions operating in the United States should promptly assess their TBML compliance policies and procedures and make improvements, where needed, in relation to their trade-related activities