Treasury Official: Russian Invasion Prompts Need to Rethink ‘Culture of Compliance’

Speaking at an industry event today, Elizabeth Rosenberg, assistant secretary for terrorist financing and financial crimes at the Treasury Department, lauded the financial industry’s quick response to implement a growing list of sanctions against Russia and individuals close to President Putin, in light of the recent invasion of Ukraine. She also flagged three critical things that the compliance professionals should adapt their work “to meet this moment.”

“Russia’s war has meaningfully expanded [anti-money laundering] and sanctions obligations,” Rosenberg said, emphasizing that financial institutions should consider “what must a culture of compliance look like in a world where autocracies is on the rise, where we’re seeing basic international norms shattered by major powers for the first time since WWII?”

First, Rosenberg emphasized the need for “an updated approach to considering and managing risk,” noting that BSA/AML compliance “cannot be a ‘check the box function.’” She also noted that more must be done with regard to information sharing between the public and private sector, and to closing loopholes through which sanctioned actors can move funds and assets around the globe.

In a Q&A following her remarks, Rosenberg also addressed the future of digital asset regulation, noting President Biden’s recent executive order on crypto “should telegraph the prioritization placed by the U.S. government on understanding digital assets, on ensuring that there’s appropriate law, policy, and regulation around them, on supporting innovation in this domain . . . while ensuring that commerce in digital assets is legal.”

While she didn’t share any specific Treasury efforts related to cryptocurrency, she noted that “the greatest risk that we see when it comes to illicit financing in digital assets . . . is when foreign jurisdictions don’t themselves implement AML/CFT regulations with regard to digital assets and digital asset service providers.”