Treasury promoting new rules to stop money laundering ahead of Europe meetings

The Treasury Department is seen near sunset in Washington, Jan. 18, 2023. The Biden administration is rolling out new recordkeeping rules for U.S. investment advisers in its continued effort to clamp down on money laundering, illicit finance and fraud in the American financial system. (AP Photo/Jon Elswick, File)

WASHINGTON (AP) — The Biden administration is stepping up efforts to stop dirty money from flowing through the U.S. financial system with a slew of new rules aimed at increasing corporate transparency and regulating occupations that are exploited for money laundering.

As the second anniversary of Russia's invasion of Ukraine approaches and the war in Gaza enters its fifth month, the U.S. also faces renewed pressure to close loopholes that allow illicit funds to flow from the U.S. into Russia, Iran and the hands of militant Hamas figureheads.

Brian Nelson, Treasury's undersecretary for terrorism and financial intelligence, will be in Paris next week to lay out the latest U.S. efforts at meetings of the Financial Action Task Force, an initiative of the Group of Seven involving 39 nations that sets international standards on how to combat money laundering and illicit finance. He previewed U.S. strategy in remarks Thursday at the Atlantic Council, a nonpartisan think tank.

“We are undertaking a concerted effort to address the systemic deficiencies in the United States’ anti-money laundering and countering the financing of terrorism framework," Nelson said.

The international community is expecting the U.S. to improve its corporate transparency rules in order to maintain its status as a safe haven for investment.

A 2016 assessment by the task force on the effectiveness of measures to combat money laundering and terrorist financing identified four categories where the U.S. is “not compliant”— including real estate ownership, regulating certain non-banking professions and others— which could threaten the U.S.' standing as a place for safe investment.

Treasury in recent months has announced a collection of rulemakings intended to make the financial system more transparent.

“We have identified numerous cases involving criminals and U.S. adversaries seeking to operate with anonymity using opaque corporate structures,” Nelson said.

“A recurring risk that we are focused on is the misuse of corporate structures to launder or conceal funds. Anonymous companies are a favorite tool for bad actors seeking to conceal their activities and their funds,” Nelson said.

This year, Treasury started building out a new database that collects “beneficial ownership” information on firms as part of a new government effort to unmask shell company owners. Critics of the rule say it is unduly burdensome on small firms, violates privacy and free speech protections and infringes on states’ powers to govern businesses.

There have also been rollouts of a rule that would require real estate professionals to report information to the agency about non-financed sales of residential real estate to legal entities, trusts and shell companies and new recordkeeping rules for U.S. investment advisers that would require them to develop anti-money laundering programs and file reports with the government when suspicious activity is detected by clients.

Addressing the gaps in the U.S. anti-money laundering regime “will help prevent bad actors from operating across the United States and protect Americans from harm,” Nelson said. “Treasury’s efforts, therefore, will help us to advance prosperity and security at home, while leading by example around the world.”