It’s time for America to think differently about money laundering and risk assessment

By Housing News

There
is
a
robust
international
network
working
to
prevent
money
laundering.
It’s
called
the
FATF
(Financial
Action
Task
Force).
It
has
headquarters
in
Paris
and
works
through
nine
regional
satellite
organizations
on
every
continent
except
Antarctica.
It
provides
guidance
to
more
than
100
countries
on
anti-money
laundering
best-practices,
and
it
puts
offenders
and
scofflaws
on
either
a
greylist
(naughty)
or
blacklist
(criminal)
as
a
way
to
herd
all
these
cats.

Now,
the
US
has
stepped
back
from
its
leadership
role
in
the
fight
against
financial
crime.
For
an
administration
that
is
in
the
first
inning,
it
is
a
breathtaking
list
of
reversals. 

For
example,
the
administration,
through
executive
order,
declared
in
February
that
the
Foreign
Corrupt
Practices
Act
hinders
our
ability
to
pay
bribes
and
thus
compete.
Then
FinCEN
(Financial
Crimes
Enforcement
Network)
issued
a
rule
revision
that
removes
the
requirement
for
most
U.S.-based
companies
to
disclose
their
beneficial
owners.
So
now
US
entities
can
hide
their
owners,
while
foreign
entities
must
disclose.
And
a
recent
Wall
Street
Journal
article
stated
that
“Trump
Administration
Retreats
From
White-Collar
Crime
Enforcement.”

To
you,
this
might
feel
like
just
another
adjustment
in

regulatory

burdens.
But
on
the
world
stage,
this
kind
of
shift
raises
alarms
and
could
lead
to
serious
adverse
consequences.
In
Paris,
Le
Monde
called
the
suspension
of
the
FCPA
a
“license
to
bribe.”
Germany
and
other
countries
throughout
the
EU
have
expressed
similar
concerns.

Why
should
we
care
what
the
French
have
to
say?


Your
global
reputation
matters

Back
in
2008,
Bill
Matthews,
my
good
friend,
started
the
SAFE
Act,
and
thus
was
born
the
NMLS
licensing
system.
It
gave
every
loan
officer
a
national
reputation
and
elevated
the
position
of
loan
officer
to
one
more
approximating
other
licensed
professionals.

In
the
same
spirit,
FATF
is
a
method
by
which
international
reputations
are
created,
guarded
or
destroyed,
rebuilt
or
ignored.
The
FATF
works
to
identify
countries
that
have
serious
strategic
deficiencies
when
attempting
to
counter
money
laundering.
They
keep
a
blacklist
of
the
real
bad
guys

North
Korea,
Iran
and
Myanmar
are
examples.
The
FATF
calls
on
all
nations
to
exercise
enhanced
due
diligence
and
to
apply
“counter-measures”
when
dealing
with
these
“blacklisted”
countries. 

For
those
countries,
so
to
speak,
that
are
committing
misdemeanors
not
felonies,
they
don’t
end
up
on
the
blacklist,
but
on
the
greylist

just
a
little
less
bad.
These
countries
are
deemed
by
FATF
to
be
defective
but
working
on
it.
Fat
but
on
a
diet.
Behind
but
working
with
a
tutor.
These
nations
include,
among
others,
Algeria,
Haiti,
Syria,
and
Venezuela.
They
are
at
least
trying.

And
what
are
their
deficiencies,
most
commonly?
Their
AML
rules
are
ineffective.
That’s
the
heart
of
it.

But
now,
the
US
has
now
taken
positions
on
white-collar
prosecutions,
on
bribery,
on
beneficial
owners
that
make
US
anti-money
laundering
efforts
much
less
ineffective.
And
at
risk
is
our
international
reputation.


Greylisting
is
not
just
symbolic

So
what
happens
now?
We
actually
don’t
need
to
guess
what
happens
when
the
FATF
loses
confidence
in
a
country.
Just
look
at
Turkey
and
the
UAE,
both
of
which
were
greylisted
in
recent
years.


In
2022,
Turkey
was
placed
on
the
greylist
for
its
money
laundering
deficiencies.
As
a
result,
they
endured
on-site
inspections
across
all
sectors
and
were
required
to
conduct
more
financial
investigations
into
potential
money
laundering.
Turkey
saw
a
sharp
drop
in
foreign
investment.
Banking
relationships
with
EU
and
U.S.
institutions
became
more
strained,
and
many
correspondent
banks
took
a
magnifying
glass
to
every
single
transaction
done
with
them.
Miserable.

Or
consider
the
UAE,
where
despite
being
a
global
financial
hub,
they
faced
serious
ramifications
for
ineffective
AML
regulations.
It
was
removed
from
the
greylist
in
2024,
and
Moody’s
commented
that
part
of
getting
off
the
greylist
required
the
UAE
to
”boost
international
cooperation,”
step
up
“investigations
and
prosecutions”
and
address
the
risk
of
“shell
companies.”


If
the
U.S.
were
greylisted—Then
what?


So
these
things
the
UAE
needed
to
fix,
these
are
exactly
the
three
areas
that
the
US
is
stepping
away
from

cooperation,
prosecutions,
shell
companies.

And
although
it
is
unlikely
that
FATF
would
greylist
the
U.S.
tomorrow,
if
you’re
someone
responsible
for
assessing
institutional
risk,
you
have
to
game
this
out:

1.
What
happens
to
U.S.

interest
rates

if
international
banks
begin
pricing
in
higher
reputational
risk?

2.
Will
global
investors
hesitate
before
deploying
capital
into
U.S.

real
estate

markets?

3.
Could
home

sales

be
affected,
particularly
in
high-dollar
markets
where
foreign
buyers
(via
LLCs
or
trusts)
play
a
large
role?

4.
Will
international
institutions
begin
applying
stricter
due
diligence
on
U.S.
clients
and
counterparties?

You
don’t
have
to
believe
this
will
happen
next
week,
but
you
should
absolutely
recognize
it
as
a
real
and
growing
risk.
You
would
be
negligent
in
your
risk
assessment
if
you
did
not
at
least
address
the
potential
of
international
blow-back
for
these
new
US
positions
vis-à-vis
AML
protocols.


Conclusion:

In
1997,
Apple’s
ad
campaign
used
the
slogan
“Think
Different,”
intentionally
substituting
the
adjective
for
the
correct
adverb

differently.
“Think
different.”
Perfect.

We
all
have
to
“think
different.”
None
of
this
is
normal.

As
a
BSA
officer,
your
job
is
to
assess
risk.
And
currently,
I
would
suggest
that
you
resist
the
pre-programming
in
your
brain
that
says,
“nah,
that
can’t
happen.” 

What
could
happen
here
if
the
US
makes
the
greylist?
Impaired
ability
to
wire
funds?
Constricted
foreign
capital?
China
a
memory?
Increased
burden
on
US
companies
doing
business
abroad? 

If
you
are
inclined
to
disregard
all
this
due
to
your
heartfelt
jingoism,
think
what
would
happen
if
another
country
like
Venezuela
or
Mexico
had
made
the
moves
we’ve
just
made.
Other
nations
would
punish
them.

And
though
the
US
has
through
our
“soft-power”
created
a
substantial
amount
of
goodwill
around
the
world,
that
goodwill
is
not
unlimited,
and
is,
in
this
environment,
arguably
greatly
reduced.
Given
tariffs
and
threats
of
tariffs,
there
may
be
a
great
number
of
nations
that
would
like
to
see
us
hoisted
by
our
own
petard.”

If
you
are
responsible
for
BSA/AML

compliance
,
or
if
you
are
in
risk
assessment,
you
have
to
mentally
go
to
some
pretty
dark
places
right
now. 

Think
different.


Bob
Simpson
is


the
CEO
of
DaylightAML


This
column
does
not
necessarily
reflect
the
opinion
of
HousingWire’s
editorial
department
and
its
owners.


To
contact
the
editor
responsible
for
this
piece:




[email protected]
.

 

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