Remarks by Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg to the Union of Arab Banks

As prepared for delivery

Hello and hello to all of you. My name is Elizabeth Rosenberg, and I am the Assistant Secretary for Terrorist Financing and Financial Crimes at the United States Department of the Treasury. It is a pleasure for me to address this group again. Much has changed in the world since I spoke to you in February. Most notable for this group, of course, is Russia’s invasion of Ukraine and the economic consequences that followed.

Russia’s illegitimate and brutal invasion of Ukraine brought together more than 30 countries around the world, representing more than half of the global economy, to impose the largest sanctions regime in modern history. And as long as Russia’s invasion of Ukraine persists, our global and coordinated efforts to impose costs on Russia and limit its ability to continue this war of aggression will also persist.

Our most recent sanctions designations exemplify this effort: the US Treasury has taken action against Russia’s military-industrial supply chain, as well as some of its top financial executives who seek to exploit the international financial system to fund war. of Putin. And Russia is working to exploit the global financial system, not just to raise and move funds to finance an illegal and unjust war, but to evade sanctions and financial controls in dozens of countries that are designed to protect the world. financial integrity, stability and growth. .

Your financial institutions, like ours, are vulnerable to Russian accomplices in this war. There are public reports that Russian money laundering is active in the Arab world. It’s something we all have a stake in preventing, investigating and eliminating.

The invasion of Russia certainly changed a lot of things; this includes disruption to global supply chains and soaring grain and energy costs. But one thing has remained constant, and has even been clarified, thanks to our renewed attention to tracking Russia’s money: the vulnerabilities that Russia exploits in the international financial system are neither new nor unique.

The corrupt cronies of Putin’s inner circle use the same loopholes others use to hide their ill-gotten gains: shell companies, proxies, corrupt gatekeepers and weak anti-money laundering executives. Additionally, they seek to protect and reinvest their assets by moving them overseas and storing them in valuable sectors like real estate.

Unfortunately, these practices also originate in your countries. Take Lebanon, for example. Since October 2019, Lebanese elites have ignored public calls for transparency and reform, while protecting their own assets from depreciation, moving their own money out of the country to other jurisdictions. The US Treasury estimates that since the October 2019 protests began, Lebanese banks have allowed some customers to transfer at least $456 million to their own foreign accounts. Of course, it is neither illegal nor illicit to smuggle money out of Lebanon. But can the international financial community discern that all of these funds have been properly screened and vetted at the appropriate level for politicians and businessmen potentially involved in corruption? Or have certain elements of the international financial community been complicit in moving the proceeds of corruption? Or deprive the Lebanese people of the funds that should be made available to them in Lebanon? Where are these funds now?

These are difficult questions. The U.S. also grapples with them in many ways – U.S. financial industry executives and compliance professionals have a responsibility and an obligation to rigorously undertake the various tasks of protecting the integrity and stability of the financial system. Despite our best efforts, the United States remains a preferred destination for many illicit financiers. That is why we are taking concrete action.

On September 29, the US Treasury’s Financial Crimes Enforcement Network, also known as FinCEN, released a new rule on beneficial ownership information reporting requirements. This represents a historic shift in financial transparency for the United States. The rule will require certain entities to disclose information about their beneficial owners and the people who formed them, meaning the actual people who own, control or created those companies. This requirement will also apply to certain foreign entities registered to do business in the United States.

We also work with each of your governments to increase financial transparency and accountability requirements to align with international standards. However, governments typically don’t act or innovate as quickly as the private sector, and you can all take steps now to shore up some key vulnerabilities. This is particularly relevant to jurisdictions such as Iraq, for example, where some politicians, driven by corruption and foreign interference, are actively undermining transparency and reform efforts.

I would like to take the opportunity today to point out two key vulnerabilities revealed by our heightened focus on Russian money laundering: (1) a transformed risk associated with corrupt elites, and (2) the lack of transparency in the sector. immovable.

When I spoke here before, I spoke of the ever-changing risks posed by corrupt elites – and some of those warnings are now coming true, unfortunately. Designated Russians have turned to family members, associates and anonymous front companies in jurisdictions with weaker controls to hide their ill-gotten gains and maintain connectivity with the international financial system. And even though the United States and our partners publicly designate many individuals, there are other illicit actors in its corrupt patronage networks who launder money on their behalf.

For financial institutions like yours, checking the U.S. Treasury’s Office of Foreign Assets Control sanctions lists is not enough to vet high-risk customers. The UK and EU are also taking unprecedented action against corrupt individuals. Although these lists are coordinated, they are not identical. I strongly encourage you all to pay close attention to the UK and EU sanctions measures, and use them to form the appropriate enhanced due diligence procedures for high risk individuals in your financial systems. In the coming months, my teams will travel to jurisdictions known to have unusual financial flows linked to Russian oligarchs and elites to share information and, where appropriate, encourage investigations.

For real estate, public information has pointed to an increase in Russian purchases abroad, and in particular in the Gulf. Some of these purchases and investments could be used to evade multilateral sanctions. Your increased vigilance will be essential to ensure that your jurisdictions do not participate in the laundering of the proceeds of corruption or facilitate the evasion of sanctions, among other crimes. For example, this summer, the UAE Ministry of Economy announced new regulations and reporting requirements for cash purchases of real estate, as well as reporting requirements for any purchases made with virtual assets or from the proceeds of the sale of virtual assets.

This information and other enhanced regulatory measures will be key to identifying and disrupting any Russian illicit finance or sanctions-busting activity. I encourage you all to familiarize yourself with the Guide to the Risk-Based Approach for the Real Estate Sector released by the Financial Action Task Force in July of this year. I also encourage you to deepen your review of transactions related to the real estate sector and to communicate with all your partners – whether they are real estate agents, lawyers, notaries, developers, insurance companies and accountants – to ensure that they are not funneling the proceeds corruption or unwitting complicity in international money laundering.[1]

When I last spoke to you, I asked you all to stay vigilant against corruption, share information among yourselves, and invest in strong compliance programs. I know that the Union of Arab Banks has organized AML/CFT workshops since then, which I was delighted to see. Yet the hard work continues. Every financial institution represented here today provides essential services to individuals, businesses and entities, and those services must continue. Along with these essential services, we all have a responsibility to keep illicit and corrupt activity out of our systems. I look forward to continuing our work on this, together.

Thanks.

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[1] https://www.fatf-gafi.org/publications/fatfrecommendations/documents/guidance-rba-real-estate-sector.html

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