FinCEN Issues Advisory on FATF-Identified Jurisdictions with AML/CFT Deficiencies (with Lofchie Comment)

FinCEN issued an advisory regarding changes to the lists of jurisdictions with strategic Anti-Money Laundering and Counter-Terrorist Financing ("AML/CFT") deficiencies. The lists were compiled by the Financial Action Task Force ("FATF"). The changes affect the due diligence obligations of U.S. financial institutions.

In the advisory, FinCEN announced that Ecuador was removed from the FATF list of jurisdictions subject to countermeasures or enhanced due diligence. FinCEN also reported that Ecuador has "made progress in substantially or largely addressing its FATF action plan." Indonesia also was removed from the FATF listing and monitoring process. Conversely, Bosnia and Herzegovina were added to the list of countries that have significant deficiencies, although FinCEN reported that Bosnia "has made a high-level political commitment to work" on remedying those deficiencies.Iran and the Democratic People's Republic of Korea ("North Korea") remain the only jurisdictions on the list that are subject to countermeasures, while Algeria and Myanmar remain subject to enhanced due diligence requirements. FinCEN reminded financial institutions of their enhanced due diligence obligations under the Bank Secrecy Act, including the enhanced scrutiny of the correspondent accounts of banks in these jurisdictions.

Regarding Iran, FinCEN stated that U.S. financial institutions are subject to a broad range of restrictions and prohibitions "due to a number of illicit financing risks, including money laundering, terrorist financing and weapons of mass destruction (WMD) proliferation financing" (emphasis supplied).

With respect to the 14 jurisdictions that remain on one list or another - including Ecuador, Bosnia and Herzegovina - the Advisory reminded financial institutions of their general due diligence obligations under 31 C.F.R. § 1010.610(a); i.e., "specific, risk-based, and, where necessary, enhanced policies, procedures and controls that are reasonably designed to detect and report known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered, or managed in the United States."

Lofchie Comment: In light of the significant sanctions imposed on firms that violate AML requirements, those firms should review their procedures carefully regarding money associated with each of the countries on the FinCEN lists.