financial institutions

FinCEN Urges Financial Institutions to Focus on Detecting Proceeds of Foreign Public Corruption


The Financial Crimes Enforcement Network (“FinCEN”) recently issued an advisory urging financial institutions (including certain cryptocurrency businesses) to implement controls to help detect proceeds of foreign public corruption. The Advisory describes the types of corrupt payments and arrangements that financial institutions should be looking for and identifies red flags to help those institutions detect and report suspicious transactions that may involve kleptocracy and foreign public corruption.

Targeting Corruption. FinCEN reemphasizes that fighting corruption is a priority for the Biden Administration (as Orrick discussed here) and focuses on the “crucial role” financial institutions play in “identifying corrupt activity and associated money laundering on the part of foreign public officials” and kleptocrats, which it describes as those who wield political power or influence to enrich themselves at the expense of their nation.1 “Foreign public corruption erodes public trust and disproportionately harms the most vulnerable in societies[,]” said FinCEN Acting Director Himamauli Das in the press release accompanying the Advisory. Das urged financial institutions to “remain vigilant and promptly report suspicious financial activity.”2

While the Advisory’s cautions relate to public corruption globally, FinCEN singles out Russia as a “particular concern,” describing “widespread” corruption in, and linked to, the country, and the role that Russian kleptocrats and oligarchs play in supporting Russian President, Vladimir Putin’s regime, including Russia’s invasion of Ukraine. The Advisory builds on FinCEN guidance issued in recent weeks concerning the use of digital assets (crypto) and ransomware and the purchase of luxury goods and high-value assets to evade Russia sanctions.

Types of Corruption. The Advisory provides an overview of kleptocracy and foreign public corruption under the umbrellas of (1) wealth extraction and (2) laundering illicit proceeds.

FinCEN describes two methods of wealth extraction. The first, bribery and extortion, includes payments to foreign officials to obtain or retain business or other benefits, and may include coercion by corrupt officials. These improper arrangements may involve third-party facilitators or shell companies to conceal the purpose and flow of payments. The second, misappropriation or embezzlement of public assets, includes the theft, diversion, or misuse of public assets or resources for personal benefit. This type of corruption may involve officials exploiting or deceiving parties that seek to do business with the government.

Under the category of laundering illicit proceeds, the Advisory highlights the use of shell companies and offshore financial accounts to obscure the ownership and origin of illicit funds or facilitate the payment of bribes or misuse of assets, and the purchase of real estate, luxury goods and other high-value assets to launder proceeds of corruption. The Advisory also highlights U.S. government efforts against Russian elites, including pursuing their real estate, private aircrafts, and yachts.

Red Flags. The Advisory offers a list of red flags (available here) to help financial institutions detect transactions associated with kleptocracy and public corruption. The flags concern opacity in awarding government contracts; transactions involving services to state-owned companies; foreign business conducted through personal accounts; foreign jurisdictions that appear unrelated to the work of, or high-value assets not commensurate with, a government official’s role; charges at above-market rates that lack supporting detail or that do not match the documentation; and the use of third parties, fictitious emails, or fraudulent documents to conceal the origin of funds or ownership.

Suspicious Activity Reporting. The Advisory concludes with a “reminder” of Bank Secrecy Act (“BSA”) obligations for financial institutions, including scenarios in which financial institutions must file a suspicious activity report (“SAR”). The Advisory also asks institutions to specifically cite this document (“CORRUPTION FIN-2022-A001”) to indicate a connection between the suspicious activities being reported and the activities described in the Advisory. It also notes existing guidance on BSA reporting requirements and due diligence.

Takeaways. Although the Advisory and its guidance are framed in general terms, the explicit links to Russia and the types of corruption highlighted both serve as yet another indication of the Administration’s focus on such ties. Third-party analysis of SAR filings suggests that certain financial institutions, such as cryptocurrency exchanges and other “money services businesses,” may not be meeting their obligations to file corruption-related SARs.3 This Advisory suggests that such SAR filing failures will likely receive additional scrutiny from FinCEN.

The Advisory confirms that financial institutions need to take care to identify possible links to Russia. While the “red flags” listed are likely familiar to those who work in the anti-corruption field, they serve as a reminder and warning. Financial institutions should continue to prioritize the establishment of risk-based controls and procedures that include reasonable steps that can help them understand their customers and meet regulators’ due diligence expectations.


1 FinCEN Press Release, FinCEN Issues Advisory on Kleptocracy and Foreign Public Corruption, (April 14, 2022).

2 Id.

3 Alison Jimenez, Kleptocracy Suspicious Activity Reports, Dynamic Securities Analytics, Inc. (April 15, 2022).

CFTC Approves Final Rule Exempting Certain Swaps from Swap-Clearing Requirements


On November 2, the Commodity Futures Trading Commission (CFTC) approved a final rule exempting swaps entered into by certain financial institutions from the CFTC’s swap-clearing requirement under the Commodity Exchange Act (CEA). The exemption applies to swaps entered into by certain central banks, sovereign entities, international financial institutions, bank holding companies, savings and loan holding companies and community development financial institutions. Release.

Federal Reserve Announces its Paycheck Protection Program Liquidity Facility is Fully Operational and Available to Provide Liquidity to Eligible Financial Institutions


On April 16, the Federal Reserve announced that its Paycheck Protection Program Liquidity Facility is fully operational and available to provide liquidity to eligible financial institutions, which will help support small businesses. The Small Business Administration’s Paycheck Protection Program, or PPP, guarantees loans extended by qualified lenders to small businesses so that those businesses can keep workers employed. Release.

FFIEC Updates Interagency Guidance on Pandemic Planning


On March 6, the member agencies of the Federal Financial Institutions Examination Council (FFIEC) issued updated guidance specifying that financial institutions’ business continuity plans should address the threat of a pandemic outbreak and its potential impact on the delivery of critical financial services. The guidance identifies actions that banks should take to minimize the potential adverse effects of a pandemic. FFIEC Guidance.

EBA Publishes Discussion Paper on Use of Consumer Data by Financial Institutions

On May 4, 2016, the EBA published a discussion paper on innovative uses of consumer data by financial institutions, in line with its mandate to monitor financial innovation.  The EBA report notes that although general provisions apply to financial institutions regarding secrecy, conduct and data protection, which impose restrictions on the use of consumer data, EU legislation specific to the financial sector contains few requirements that address the use of consumer data by financial institutions.

In recent years, some financial institutions have started using consumer data in innovative ways across the EBA’s regulatory remit (that is, mortgages, personal loans, payment accounts, payment services, and electronic money). The paper identifies risks and benefits for consumers and financial institutions of such uses, as well as for financial integrity in general. Feedback received on this discussion paper will inform the EBA’s decision on which, if any, further actions may be required to mitigate the risks arising from this innovation, while also allowing market participants to harness its benefits.

OCC and FDIC Propose New Rule on Liquidity Risk Management

On October 30, the OCC and FDIC proposed substantively the same liquidity rule as the proposal approved by the Fed on October 24.  That proposal developed by the three agencies applies to: (i) banking organizations with $250 billion consolidated assets; (ii) banking organizations with $10 billion in on-balance sheet foreign exposure; (iii) systemically important, non-bank financial institutions that do not have substantial insurance subsidiaries or substantial insurance operations; and (iv) bank and savings association subsidiaries thereof that have total consolidated assets of $10 billion (covered institutions).  The proposed rule does not apply to community banks.

Covered institutions would be required to maintain a specified level of high-quality liquid assets such as central bank reserves, government and Government Sponsored Enterprise securities and corporate debt securities that can be converted easily into cash.  Under the proposal, a covered institution would be required to hold such high-quality liquid assets on each business day in an amount equal to or greater than its projected cash outflows less its projected cash inflows over a 30-day period.  The proposed rule is consistent with the Basel Committee’s LCR standard, but is more stringent in terms of the range of assets that will qualify and the assumed rate of outflows of certain types of funding.   Release.  Proposed Rule.

Rating Agency Developments

On December 13, Moody’s released its methodology for U.S. stand-alone housing bond programs secured by credit enhanced mortgages.  Moody’s Report.  

On December 13, S&P released its methodology for pre-insolvency structural protections in Europe.  S&P Report. 

On December 12, Fitch published criteria for rating financial institutions above the sovereign.  Fitch Report.  

On December 11, Fitch updated its criteria for analyzing financing and leasing companies.  Fitch Report.  

On December 11, Moody’s released its U.S. manufactured housing loan ABS surveillance methodology.  Moody’s Report.  

On December 11, Moody’s released its methodology for mortgage insurers.  Moody’s Report.  

On December 10, S&P released its methodology for Mexican trade receivables ABS transactions.  S&P Report.

Rating Agency Developments

On August 17, S&P updated its outlook assumptions for the U.K. residential mortgage market.  S&P Report. 

On August 15, Fitch updated its criteria for securities firms.  Fitch Report. 

On August 15, Fitch updated its financial institutions recovery ratings criteria. Fitch Report. 

On August 15, Fitch updated its criteria for market value structures.  Fitch Report. 

On August 15, Fitch updated its criteria for U.S. closed-end funds.  Fitch Report. 

On August 15, Fitch updated its global financial institutions master criteria.  Fitch Report. 

On August 14, Fitch updated its tax-supported rating criteria.  Fitch Report. 

On August 14, Fitch updated its non-financial corporate recovery ratings and notching criteria.  Fitch Report. 

On August 14, Fitch updated its global bond fund rating criteria.  Fitch Report.

On August 13, Moody’s updated its criteria for Mexican RMBS.  Moody’s Report.

On August 13, Fitch updated its sovereign rating criteria.  Fitch Report.

On August 13, Fitch updated is country ceilings criteria.  Fitch Report. 

On August 13, DBRS updated its stability ratings for Canadian structured income funds.  DBRS Report. 

On August 13, DBRS updated its criteria for Canadian split share companies and trusts.  DBRS Report. 

On August 10, Fitch updated is U.S. Re-REMIC criteria.  Fitch Report.

On August 10, Fitch updated is U.S. RMBS surveillance criteria.  Fitch Report.

On August 10, Fitch updated is U.S. RMBS loan loss model criteria.  Fitch Report.

On August 10, Fitch updated its structured finance servicing continuity risk criteria.  Fitch Report. 

On August 10, Fitch updated its criteria for analysis of CRE loans securing covered bonds.  Fitch Report. 

On August 10, Fitch updated its criteria for financial institution subsidiaries and holding companies.  Fitch Report.  

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FDIC Proposed Rule on Receivership Powers

On March 20, the FDIC proposed a rule, pursuant to section 210(c)(16) of the Dodd-Frank Act, that would permit the FDIC as receiver for a failed systemically important financial institution to enforce and prevent termination of the contracts of the institution’s subsidiaries or affiliates.  Comments must be submitted within 60 days of publication in the Federal Register.  FDIC Release. FDIC Rule on Receivership.