As US pledges renewed fight against dirty money, head of financial crime agency says funding shortfalls have caused delays

In tes­ti­mo­ny, FinCEN’s act­ing chief says ‘out­matched’ team is falling behind on polic­ing cryp­tocur­ren­cy and imple­ment­ing major anti-mon­ey laun­der­ing law.

The head of the United States’ finan­cial crime fight­ing unit says his agency is com­ing up short in the bat­tle against dirty mon­ey due to a lack of resources.

The Financial Crimes Enforcement Network’s act­ing direc­tor Himamauli Das told a con­gres­sion­al com­mit­tee that his small team is “incred­i­bly tal­ent­ed,” but “out­matched” in polic­ing cryp­tocur­ren­cy exchanges and behind on cre­at­ing a ben­e­fi­cial own­er­ship database.

“As you are aware, we are miss­ing dead­lines,” Das told mem­bers of the U.S. House Committee on Financial Services on Thursday. “To be blunt, we will like­ly con­tin­ue to do so because our bud­get sit­u­a­tion has required us to make sig­nif­i­cant trade-offs among com­pet­ing priorities.”

A key pri­or­i­ty for the agency is cre­at­ing the own­er­ship data­base, or reg­istry, man­dat­ed by the Corporate Transparency Act, which was enact­ed over a year ago. Under the law, mil­lions of com­pa­nies incor­po­rat­ed in the U.S. must report, for the first time, the names of their true own­ers to the fed­er­al gov­ern­ment. Law enforce­ment offi­cials and com­pli­ance offi­cers at banks and oth­er finan­cial insti­tu­tions would have access to the data­base, allow­ing them to more eas­i­ly pur­sue inves­ti­ga­tions or shut off accounts with links to crim­i­nal actors.

After pro­vid­ing the Treasury office tens of mil­lions of dol­lars less than it had asked for, Congress has left the agency scram­bling to imple­ment key pieces of the land­mark anti-mon­ey laun­der­ing law, Das said at the hearing.

As the International Consortium of Investigative Journalists has report­ed across mul­ti­ple inves­ti­ga­tions, anony­mous com­pa­nies are a major vul­ner­a­bil­i­ty in the glob­al fight against tax avoid­ance and mon­ey laun­der­ing. Drug car­tels, oli­garchs, despots and the glob­al elite use them to con­ceal for­tunes from tax author­i­ties and law enforcement.

The United States plays a big role. Delaware, Wyoming and Nevada are among the world’s top loca­tions to set up anony­mous companies.

The Corporate Transparency Act was attached to a mas­sive nation­al defense fund­ing bill that Congress passed in late 2020 with a veto-over­ride. The law, sup­port­ed by both the U.S. Chamber of Commerce and left-lean­ing Public Citizen — an unusu­al Washington alliance — was the result of years of negotiations.

The FinCEN Files, a glob­al inves­ti­ga­tion on dirty mon­ey flows led by ICIJ and BuzzFeed News, was cred­it­ed with help­ing to get the leg­is­la­tion over the fin­ish line in 2020.

Establishing a reg­istry of com­pa­ny own­ers was a key reform that experts said was need­ed in response to ICIJ inves­ti­ga­tions. The issue has increased in rel­e­vance after Russia’s inva­sion of Ukraine in February and a flur­ry of new sanc­tions of Russian oli­garchs and com­pa­nies. Several weeks ago the U.S. gov­ern­ment announced a pro­gram to iden­ti­fy and freeze oli­garch assets, which are often hid­den under lay­ers of shell com­pa­nies, includ­ing in the U.S.

Yet a new era of cor­po­rate trans­paren­cy can only come into effect when FinCEN fin­ish­es draft­ing the exact rules that will gov­ern the com­pa­ny own­er­ship data col­lec­tion and dis­tri­b­u­tion under the new law.

Notably, Das declined to com­mit to a spe­cif­ic time­line for launch­ing the all-impor­tant com­pa­ny own­er­ship pro­gram when law­mak­ers asked if it will be com­plet­ed by the end of this year. “I do not have a time­line for the estab­lish­ment of the data­base,” Das said. “We’re work­ing incred­i­bly hard giv­en the resource con­straints we have.”

Anti-mon­ey laun­der­ing experts have argued that the Treasury agency is under­fund­ed and over­stretched in its role as the world’s lead­ing dirty mon­ey watch­dog, even with fund­ing boosts sought by the Biden admin­is­tra­tion. FinCEN is staffed with rough­ly 300 employ­ees includ­ing data ana­lysts, inves­ti­ga­tors, enforce­ment offices and pol­i­cy wonks.

At the hear­ing, mul­ti­ple House mem­bers expressed dis­sat­is­fac­tion at FinCEN’s delayed imple­men­ta­tion of the ben­e­fi­cial own­er data­base, which was expect­ed to be com­plet­ed sev­er­al months ago.

In his tes­ti­mo­ny, Das said that his office had asked for eighty new full time staff mem­bers who would be large­ly devot­ed to imple­ment­ing the ben­e­fi­cial own­er­ship data­base and oth­er ele­ments of last year’s leg­is­la­tion. These posi­tions would include data spe­cial­ists and out­reach coor­di­na­tors to help finan­cial insti­tu­tions and gov­ern­ment agen­cies under­stand how to use the forth­com­ing data system.

In dis­cussing staffing short­falls, Das zeroed in on the prob­lem of hav­ing too few ana­lysts to track crim­i­nals using cryp­to cur­ren­cies to covert­ly move mon­ey. “We con­tin­u­ous­ly run up against chal­lenges in terms of try­ing to fig­ure out who is avail­able to do work around cryp­to cur­ren­cy issues to be able to com­bat that illic­it finance,” he said.

The Corporate Transparency Act con­tains loop­holes pushed for by spe­cial inter­est groups that may blunt some of its pow­er, even accord­ing to those who advo­cat­ed for it and have cel­e­brat­ed its passage.

The own­er­ship data­base will, for instance, not be pub­licly acces­si­ble. Only a sub­set of gov­ern­ment and finan­cial insti­tu­tion offi­cers will be able to access own­er­ship infor­ma­tion con­tained in the new “secure, non­pub­lic data­base” that the law estab­lish­es. Researchers, jour­nal­ists and oth­ers try­ing to track dark mon­ey will be shut out.

Still, advo­cates say they hope FinCEN will imple­ment it smooth­ly, if not on time.

“Even with the resources we have and are using, we’re work­ing full tilt,” Das told law­mak­ers Thursday. “But we need more.”

Original source of arti­cle: www.icij.org