FinCEN asks credit unions to help fight kleptocracy

We’ve blogged a lot recently about compliance issues raised by Russia’s invasion of Ukraine and the U.S. sanctions imposed by the Biden Administration to put pressure on the Russian government. In addition to the sanctions administered and enforced by the Office of Foreign Assets Control (OFAC), Russia also presents financial crime concerns as oligarchs attempt to evade sanctions and use the U.S. financial system to engage in money laundering and other financial crimes. Back in March, we blogged about an alert from the Financial Crimes Enforcement Network (FinCEN) that warned U.S. financial institutions about potential sanctions evasion activities and which provided red flag indicators that could help credit unions identify such activity. A few weeks after that alert, FinCEN published Advisory FIN-2022-A001 (the advisory), which addresses kleptocracy and “urges financial institutions to focus efforts on detecting the proceeds of foreign public corruption.” This blog will focus on that advisory.

The advisory focuses on “corruption,” which FinCEN defines as including “the abuse of authority or official position to extract personal gain.” FinCEN notes that the Biden Administration has identified the fight against corruption as a “core national security interest,” and discusses the various problems that foreign corruption can cause in other countries – including depriving the public of critical public services and harming the most vulnerable groups in a society. More specifically, the advisory discusses “kleptocracy,” which occurs when a government is “controlled by officials who use political power to appropriate the wealth of their nation for personal gain, usually at the expense of the governed population.” FinCEN specifically calls out Russia as a kleptocracy, noting that “[c]orruption is widespread throughout the Russian government and manifests itself as bribery of officials, misuse of budgetary resources, theft of government property, kickbacks in the procurement process, extortion, and improper use of official positions to secure personal profits.” The advisory then describes how oligarchs in Russia benefit financially by keeping Russian President Vladimir Putin in power, and thus enable Russia’s current actions in Ukraine. The U.S. government has imposed sanction on Russian oligarchs for that reason (among others), as discussed in this previous blog post.


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