FinCEN has publish an advisory to alert financial institutions about the potential abuse of the U.S. financial systems by senior political figures from South Sudan. The U.S. Department of State has been documenting the civil unrest with the warring parties who have failed to adhere to an agreed ceasefire, leaving the civilian population to suffer through widespread violence and atrocities, human rights abuses, recruitment and use of child soldiers, attacks on peacekeepers, and obstruction of humanitarian operations, as well as widespread food insecurity.
In addition to the human rights atrocities, high-level political figures are seeking to hide money they obtained through the following corrupt practices:
- Abuse of position and use of shell companies: Corrupt officials in South Sudan will use their position to enrich themselves and conduct business through the use of shell companies belonging to the relatives of government officials.
- Abuse of government contracting (natural resources): Government officials will either misappropriate public funds outside of parliament-approved budget items, or will steer government contracts (such as in the gas and oil sector) to family members with beneficial ownership or control.
- Use of international financial system and real estate: Once money is move outside of Sudan, it is often used to purchase real estate.
- Abuse of military procurement: Sudan’s military accounts for half of Sudan’s annual budget; this is the highest in the region and it is riddled with corrupt practices by senior military officials in the pursuit of enriching themselves through the procurement of military material and services.
- Abuse of military payrolls: High-ranking generals routinely siphon off civilian budgets or their own organizations for their personal benefit. Military commanders have reportedly stolen the salaries of their soldiers, or the salaries of “ghost soldiers” who are fictitious and only exist on payroll documents.
In response, the United States has sanctioned nine individuals and three companies. These actions increase the likelihood that other South Sudanese senior political figures and opposition leaders may seek to protect their assets, including those that were obtained through political corruption. In addition, FinCEN has issued an alert to remind all financial institutions about their AML obligations to:
- Check and update the OFAC List of Specially Designated Nationals and Blocked Persons
- Not engage is any transaction or make any financial provisions involving designated individuals or entities
- Fulfill due diligence obligations and become generally aware of public reports of high-level corruption associated with certain senior foreign political figures, family members, associates, or associated legal entities or arrangements
- Assess the risk for laundering the proceeds of public corruption
- Use enhanced due diligence procedures to detect and report transactions that may involve foreign corruption in private banking accounts held for non-U.S. persons
- Use appropriate, specific, risk-based, and enhanced policies, procedures, and controls that are reasonably designed to detect and report known or suspected money laundering activity through correspondent accounts maintained for foreign financial institutions
- File a suspicious activity report (SAR) if the financial institution knows or suspects a transaction involves:
- Funds derived from illegal activity
- Attempts to disguise illegal activity
- Attempts to evade regulations related to the Bank Secrecy Act (BSA) reporting requirements
- A lack of business or apparent lawful purpose
- The use of the financial institution to facilitate criminal activity
When filing a SAR related to activity of a South Sudanese political official, the filer should:
- Select SAR field 35(l) and include the key term “SOUTH SUDAN”
- Include the key term “SOUTH SUDAN” in the SAR narrative and in SAR field 35(z)
FinCEN Advisories like this one, keep financial firms alerted to potential threats aimed at the U.S. financial systems. The due diligence process on the front lines coupled with the suspicious activity reporting process can be crucial to identifying money laundering and other financial crimes associated with foreign and domestic political corruption.
In response to the above advisory, FIRE Solutions has updated its Anti-Money Laundering — Current Issues, Firm Element course and published this blog post in an effort to disseminate this information as quickly as possible.
For more information about this alert, please contact the FinCEN Resource Center at FRC@fincen.gov, or the toll-free hotline at (866)556-3974 .
For a full copy of the FinCEN Advisory, visit FIN-2017-A004
Click here for a copy of the related FinCEN Press Release.
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