United States of America
FATF AML Deficiency List
US Dept of State Money Laundering assessment
Although some states in the US offer offshore financial services, e.g. Delaware, the US is not considered an OFC
The USA is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The latest follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in the USA was undertaken by in 2020. According to that Evaluation, the USA was deemed Compliant for 9 and Largely Compliant for 22 of the FATF 40 Recommendations. It was also deemed Highly Effective for 4 and Substantially Effective for 4 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.
US Department of State Money Laundering assessment (INCSR)
The USA is deemed a Jurisdiction of Primary Concern by the US Department of State International Narcotics Control Strategy Report (INCSR).
There is no US State Department Money Laundering Report available however, we set out below an extract from the IMF Report: United States: Financial Sector Assessment Program-Anti-Money Laundering And Combating The Financing Of Terrorism (AML/CFT)-Technical Notes: -
This note sets out the findings and recommendations made in the Financial Sector Assessment Program (FSAP) for the United States in the areas of anti-money laundering and combating the financing of terrorism (AML/CFT). It summarizes the findings of a targeted review of measures to prevent U.S. legal persons and arrangements from being misused for money laundering (ML)/financing of terrorism (FT). This discussion is not, in any way, an evaluation or assessment of the U.S. AML/CFT system. The United States will undergo a complete mutual evaluation by the Financial Action Task Force (FATF) beginning June 1, 2015, the results of which will be made public in 2016.
The last FATF assessment in 2006 found that the United States had implemented an AML/CFT system that was broadly in line with the international standard, although a significant shortcoming was identified. The United States had significantly strengthened its AML/CFT regime since the previous mutual evaluation, including through enhanced legislation. However, there was a notable shortcoming with respect to the Recommendation addressing customer due diligence (CDD) which is one of the FATF’s core Recommendations. There were also other deficiencies regarding the availability of ownership information about corporations and trusts, and the requirements applicable to certain designated non-financial businesses and professions (DNFBPs).
The U.S. AML/CFT legal and institutional framework has yet to address deficiencies identified in the most recent FATF mutual evaluation report (MER) regarding ownership information for U.S. corporations and trusts; in particular more rapid progress is needed to enhance transparency of legal persons to bolster financial system integrity. Trusts have a different legal and institutional framework. Draft regulations have been produced to strengthen financial institutions’ (FIs) obligations to identify and verify the identity of beneficial owners and policy intentions announced to improve the authorities’ access to information on the beneficial ownership (BO) and control of U.S. corporations. These measures—to address deficiencies identified in the last FATF MER of June 2006—are progressing slowly. However, in 2010 U.S. tax authorities began requiring information that includes some BO information from legal entities and trusts applying for an Employer Identification Number (EIN), which is required when they have income, employees, or are otherwise required to file any documents with the Internal Revenue Service (IRS) or open an account with an FI. Nonetheless, deficiencies remain, and even when completed, the intended changes may not completely address all of the deficiencies cited in the last FATF mutual evaluation report.
The approach taken by law enforcement agencies (LEAs) to access BO information—relying largely on a wide range of investigative powers and techniques— while often successful cannot always ensure timely access to current BO information of all U.S. corporations. The inability to access accurate BO information directly from states, FIs or agents serving corporations or trusts may curtail how effective the authorities can be in pursuing criminally persons who misuse corporations to launder proceeds generated domestically as well as abroad or to trace and recover their illicit assets. This includes laundering associated with taxes evaded in the United Statesand abroad, by U.S. citizens and foreigners respectively, and to cooperate effectively with their foreign counterparts in this regard. The amount laundered from taxes evaded in the United States may be substantial. Serious tax crimes are not predicate crimes to ML. The authorities estimated the U.S. net tax gap to be around $450 billion in 2006, excluding international tax evasion, and tax crimes for state taxes.
General overview of the U.S. AML/CFT Framework
The United States has a mature legal and institutional AML/CFT framework, having first criminalized money laundering in 1986. The framework covers most requirements of the FATF recommendations. There are many agencies involved in combating ML and FT at both federal and state levels encompassing regulatory, law enforcement, prosecutorial, and other roles. The United States is a founding member of the FATF, and has undergone three assessments against the FATF Recommendations.
The FATF assessment in 2006 found that the United States had implemented an AML/CFT system that was broadly in line with the international standard. It had significantly strengthened its AML/CFT regime since the previous mutual evaluation (June 1997), including through enhanced legislation, subjecting most deposit-taking institutions to the full range of AML/CFT requirements, aggressive law enforcement action, and good cooperation domestically and internationally.
However, shortcomings were identified, notably in relation to some specific requirements for undertaking customer due diligence (CDD), the availability of corporate ownership information, and the requirements applicable to certain designated non-financial businesses and professions (DNFBPs).In relation to CDD, the evaluators determined that not all requirements were imposed on FIs using instruments that complied technically with the FATF standard and also concluded that there were no requirements for FIs to look beyond a customer to establish the identity of the beneficial owners in all cases. The evaluators found that the United States’ compliance with the two recommendations dealing with the transparency of legal persons and arrangements was very weak and rated both as non-compliant. In relation to DNFBPs, the United States was found to be non-compliant with the FATF recommendations relating to CDD, recordkeeping, suspicious transaction reporting, and internal controls and partially compliant with the Recommendation on regulation and supervision.
Fund staff, in a TN prepared in the context of the 2010 U.S. FSAP, reported some strengthening of the regime, but also a lack of progress in addressing key deficiencies. The 2010 TN reported on some enhancements to legislation and the continuation of aggressive law enforcement action. It also reported that identified deficiencies relating to CDD, coverage of DNFBPs, and the availability of BO information for legal persons and arrangements remained.
FATF also determined that the United States did not substantially address the identified shortcomings since the 2006 mutual evaluation. Under FATF procedures for its third round of mutual evaluations countries were required to report back to the FATF on steps taken to address deficiencies noted in their MERs with respect to the Recommendations that were rated as partially compliant or non-compliant. In the case of the United States, these were Recommendations on CDD for FIs, CDD and recordkeeping for DNFBPs, suspicious transaction reporting and internal controls for DNFBPs, regulation and supervision of DNFBPs, transparency of legal persons, and transparency of legal arrangements. Following the 2006 mutual evaluation, the FATF required the United States to report on progress addressing its deficiencies. The third round follow-up process was postponed pending the outcome of the U.S. fourth round mutual evaluation, which began on June 1.
Transparency and beneficial ownership of U.S. legal persons and arrangements
Broadly speaking, there are three main types of legal persons and arrangements in the United States: corporations (including limited liabilities companies), partnerships, and trusts. More than 30 million legal persons and arrangements exist, but the precise figure is unknown. They are also able to be owned or controlled by non-residents, but the extent of such ownership is also unknown. The following discussions on corporations focus on those that are not publicly traded.
It has been long recognized that U.S. corporations may be misused for ML and related predicate crimes, both by U.S. and foreign persons. The 2006 MER noted that a threat assessment identified the formation of shell companies within certain states as a serious cause for concern, and there is general agreement among LEAs that, while the vast majority of corporations pursue legal activities, others are being misused for ML (including laundering of proceeds from foreign offenses) and related predicate crimes. As identified by the authorities, corporations may be used as a front to open bank accounts without revealing the identity of the individuals who own or control the account, and corporate vehicles are a common method used to place, layer, and integrate illicit proceeds in the financial system. The authorities indicated that they reviewed ML- related indictments from 2006 to 2012 and found many cases involving the use of corporations.
In contrast, trusts are generally considered by most authorities to pose low ML/FT risks. In the United States, a trust is a legal arrangement created between two private persons or a private person and a trust company under state law. Trust companies are authorized to act in a fiduciary (i.e., trustee) capacity and are subject to the Bank Secrecy Act. However, lawyers and accountants who assist with setting up trusts are unregulated for AML/CFT. The LEAs who met with the mission are of the view that trusts are not particularly attractive vehicles to those wishing to hide their activities, particularly compared to corporations, because of tax reporting obligations. However, some authorities believe that the ML/FT risks posed by trusts are not necessarily lower. The mission was unable to access more information about the ML/FT risks posed by trusts governed by U.S. laws.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 67
World Governance Indicator – Control of Corruption 85
Corruption does not represent a significant business risk for foreign investors in the US, and companies do not consider corruption an obstacle to their operations. The US offers a competitive market and abundant business opportunities; however, companies should be prepared to deal with bureaucracy due to the decentralized structure and business activities governed by federal, state, county and municipal laws. Business costs are increased by extensive anti-corruption legislation and tough requirements for compliance and internal controls. Money laundering, abuse of office, extortion and commercial bribery are prohibited by law. Companies should be aware the US government actively and effectively enforces the established anti-corruption legislative framework, including the FCPA. The FCPA provides a narrow exception for facilitation payments and for recorded gifts of appropriate, minimal value. While gifts and facilitation payments are uncommon in practice, they may violate other anti-corruption laws depending on their value and purpose. For further information - GAN Integrity Business Anti-Corruption Portal
The US has the most technologically powerful economy in the world, with a per capita GDP of $54,800. US firms are at or near the forefront in technological advances, especially in computers, pharmaceuticals, and medical, aerospace, and military equipment; however, their advantage has narrowed since the end of World War II. Based on a comparison of GDP measured at Purchasing Power Parity conversion rates, the US economy in 2014, having stood as the largest in the world for more than a century, slipped into second place behind China, which has more than tripled the US growth rate for each year of the past four decades.
In the US, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, businesses face higher barriers to enter their rivals' home markets than foreign firms face entering US markets.
Long-term problems for the US include stagnation of wages for lower-income families, inadequate investment in deteriorating infrastructure, rapidly rising medical and pension costs of an aging population, energy shortages, and sizable current account and budget deficits.
The onrush of technology has been a driving factor in the gradual development of a "two-tier" labour market in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. But the globalization of trade, and especially the rise of low-wage producers such as China, has put additional downward pressure on wages and upward pressure on the return to capital. Since 1975, practically all the gains in household income have gone to the top 20% of households. Since 1996, dividends and capital gains have grown faster than wages or any other category of after-tax income.
Imported oil accounts for nearly 55% of US consumption and oil has a major impact on the overall health of the economy. Crude oil prices doubled between 2001 and 2006, the year home prices peaked; higher gasoline prices ate into consumers' budgets and many individuals fell behind in their mortgage payments. Oil prices climbed another 50% between 2006 and 2008, and bank foreclosures more than doubled in the same period. Besides dampening the housing market, soaring oil prices caused a drop in the value of the dollar and a deterioration in the US merchandise trade deficit, which peaked at $840 billion in 2008. Because the US economy is energy-intensive, falling oil prices since 2013 have alleviated many of the problems the earlier increases had created.
The sub-prime mortgage crisis, falling home prices, investment bank failures, tight credit, and the global economic downturn pushed the US into a recession by mid-2008. GDP contracted until the third quarter of 2009, making this the deepest and longest downturn since the Great Depression. To help stabilize financial markets, the US Congress established a $700 billion Troubled Asset Relief Program (TARP) in October 2008. The government used some of these funds to purchase equity in US banks and industrial corporations, much of which had been returned to the government by early 2011. In January 2009, Congress passed and President Barack OBAMA signed a bill providing an additional $787 billion fiscal stimulus to be used over 10 years - two-thirds on additional spending and one-third on tax cuts - to create jobs and to help the economy recover. In 2010 and 2011, the federal budget deficit reached nearly 9% of GDP. In 2012, the Federal Government reduced the growth of spending and the deficit shrank to 7.6% of GDP. US revenues from taxes and other sources are lower, as a percentage of GDP, than those of most other countries.
Wars in Iraq and Afghanistan required major shifts in national resources from civilian to military purposes and contributed to the growth of the budget deficit and public debt. Through 2014, the direct costs of the wars totalled more than $1.5 trillion, according to US Government figures.
In March 2010, President OBAMA signed into law the Patient Protection and Affordable Care Act, a health insurance reform that was designed to extend coverage to an additional 32 million Americans by 2016, through private health insurance for the general population and Medicaid for the impoverished. Total spending on healthcare - public plus private - rose from 9.0% of GDP in 1980 to 17.9% in 2010.
In July 2010, the president signed the DODD-FRANK Wall Street Reform and Consumer Protection Act, a law designed to promote financial stability by protecting consumers from financial abuses, ending taxpayer bailouts of financial firms, dealing with troubled banks that are "too big to fail," and improving accountability and transparency in the financial system - in particular, by requiring certain financial derivatives to be traded in markets that are subject to government regulation and oversight.
In December 2012, the Federal Reserve Board (Fed) announced plans to purchase $85 billion per month of mortgage-backed and Treasury securities in an effort to hold down long-term interest rates, and to keep short term rates near zero until unemployment dropped below 6.5% or inflation rose above 2.5%. In late 2013, the Fed announced that it would begin scaling back long-term bond purchases to $75 billion per month in January 2014 and further reduce them as conditions warranted; the Fed ended the purchases during the summer of 2014. In 2014, the unemployment rate dropped to 6.2%, and continued to fall to 5.5% by mid-2015, the lowest rate of joblessness since before the global recession began; inflation stood at 1.7%, and public debt as a share of GDP continued to decline, following several years of increases. In December 2015, the Fed raised its target for the benchmark federal funds rate by 0.25%, the first increase since the recession began, but the Fed has opted to hold the target rate steady at 0.25%-0.5% through the first three quarters of 2016, with US GDP growth falling below 2% in each of those quarters.
Agriculture - products:
wheat, corn, other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy products; fish; forest products
highly diversified, world leading, high-technology innovator, second-largest industrial output in the world; petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining
Exports - commodities:
agricultural products (soybeans, fruit, corn) 9.2%, industrial supplies (organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49.0%, consumer goods (automobiles, medicines) 15.0% (2008 est.)
Exports - partners:
Canada 18.6%, Mexico 15.7%, China 7.7%, Japan 4.2% (2015)
Imports - commodities:
agricultural products 4.9%, industrial supplies 32.9% (crude oil 8.2%), capital goods 30.4% (computers, telecommunications equipment, motor vehicle parts, office machines, electric power machinery), consumer goods 31.8% (automobiles, clothing, medicines, (2008 est.)
Imports - partners:
China 21.5%, Canada 13.2%, Mexico 13.2%, Japan 5.9%, Germany 5.5% (2015)
Investment Adviser Public Disclosure
Commodity Futures Trading Commission (CFTC)
Federal Reserve System ("Fed")
Federal Deposit Insurance Corporation (FDIC)
Financial Industry Regulatory Authority (FINRA)
Other Useful Links