Gregory A. Brower is Chief Global Compliance Officer for Wynn Resorts. He also serves on WLF Legal Policy Advisory Board and is the WLF Legal Pulse’s Featured Expert Contributor, White Collar Crime and Corporate Compliance.
Following last year’s Presidential Memorandum which announced a new U.S. Strategy on Countering Corruption, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) recently issued an Advisory on Kleptocracy and Foreign Public Corruption. The advisory urged financial institutions to focus their efforts on detecting the proceeds of foreign public corruption, noting that kleptocratic regimes and corrupt public officials may exploit U.S. financial institutions to launder illicit gains. This marks the latest effort by the Biden Administration in its commitment to leading the global fight against corruption.
Not surprisingly, Russia figures prominently in this latest warning to financial institutions. While the U.S. government has long expressed concerns about Russian corruption, the advisory described Russia as a particular source of concern because corruption is so prevalent throughout the Russian government. This has been highlighted by the regime’s recent invasion of Ukraine with the apparent support of the country’s elites. The advisory makes clear that these oligarchs have a mutually beneficial relationship with President Putin that allows them to misappropriate assets from the Russian people while helping keep Putin power. FinCEN warned that corrupt public officials often utilize the same money laundering methods used by bad actors in the private sector.
This new FinCEN advisory reflects the whole-of-government approach outlined in last year’s Presidential Memorandum which has also resulted in the launch of Treasury’s Kleptocracy Asset Rewards Program, which offers payments for tips leading to the seizure of assets connected to foreign corruption and DOJ’s creation of a kleptocracy task force which is intended to coordinate the investigation and prosecution of sanctions violations. These efforts compliment the work of a transatlantic task force announced last February with a mission to identify and seize assets of sanctioned individuals and companies globally.
Specifically, the advisory seeks to provide U.S. financial institutions with typologies and potential indicators associated with kleptocracy and other forms of foreign corruption. Among the common red flags highlighted are:
- Transactions involving services provided to state-owned companies or public institutions by companies registered in high-risk jurisdictions.
- Transactions involving official embassy or foreign government business conducted through personal accounts.
- Transactions involving public officials related to high-value assets that are not commensurate with the official’s reported source of wealth.
- Transactions involving public officials and funds moving to and from countries with which the officials do not appear to have ties.
- Use of third parties to shield the identity of foreign public officials seeking to hide the origin or ownership of funds.
- Transactions involving payments that do not match the total amounts set out in the underlying documentation.
- Transactions involving fictitious email addresses and/or false invoices to justify payments.
- Assets held in the name of intermediate legal entities whose beneficial owner(s) is tied to a suspected kleptocrat.
This latest FinCEN advisory should serve as a reminder to financial institutions of the critical role they play in the global fight against foreign public corruption, and the concomitant importance of effective anti-corruption compliance programs.