May 2022 / United States

Strategy Provides Roadmap to Close Loopholes Exploited by Criminals and Illicit Actors

Recommendations Include Increasing Transparency, Leveraging Partnerships, and Addressing Technological Risks

WASHINGTON – Today, the U.S. Department of the Treasury issued the 2022 National Strategy for Combatting Terrorist and Other Illicit Financing (2022 Strategy), which identifies measures to increase transparency in the U.S. financial system and strengthen the U.S. anti-money laundering/counter the financing of terrorism (AML/CFT) framework. The 2022 Strategy, prepared pursuant to Sections 261 and 262 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), addresses the key risks from the 2022 National Money Laundering, Terrorist Financing, and Proliferation Financing risk assessments and reflects the complex challenges posed by a world remade by the Covid-19 pandemic, the increasing digitization of financial services, and rising levels of corruption and fraud.

“Illicit finance is a major national security threat and nowhere is that more apparent than in Russia’s war against Ukraine, supported by decades of corruption by Russian elites,” said Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes Elizabeth Rosenberg. “We need to close loopholes, work efficiently with international partners, and leverage new technologies to tackle the risks posed by corruption, an increase in domestic violent extremism, and the abuse of virtual assets. Strengthening safeguards against money laundering and terrorist financing here in the U.S. will keep the international financial system strong.”

The 2022 risk assessments highlighted the illicit finance risk posed by the abuse of legal entities, the complicity of professionals that misuse their positions or businesses, small-sum funding of domestic violent extremism networks, the effective use of front and shell companies in proliferation finance, and the exploitation of the digital economy. The 2022 Strategy reflects the commitment of the Biden-Harris Administration to protect the U.S. financial system from the national security threats enabled by illicit finance, especially corruption.

To accomplish this, the 2022 Strategy identifies four priorities and fourteen supporting actions that will guide U.S. government efforts to effectively address the most significant illicit finance threats and risks to the U.S. financial system.

The four priority recommendations:

1. Close legal and regulatory gaps in the U.S. AML/CFT framework that illicit actors exploit to anonymously access the U.S. financial system through the use of shell companies and all-cash real estate purchases;
2. Continue to make the U.S. AML/CFT regulatory framework for financial institutions more efficient and effective by providing clear compliance guidance, sharing information appropriately, and fully funding supervision and enforcement;
3. Enhance the operational effectiveness of law enforcement, other U.S. government agencies, and international partnerships in combating illicit finance so illicit actors can’t find safe havens for their operations, and
4. Enable the benefits of technological innovation while mitigating risks, staying ahead of new avenues for abuse presented by virtual assets and other new financial products, services, and activities.

The 2022 Strategy identifies several avenues for taking action or continuing work already in progress, including legislative and regulatory action underway to enhance transparency in company formation and real estate purchases, applying AML/CFT requirements to previously uncovered financial institutions, professions, and sectors to fill gaps and reduce exemptions, clarifying the application of certain regulatory requirements to virtual asset activities, increased public awareness campaigns, more public-private partnerships to foster innovation, and collaboration with foreign partners on illicit finance issues.

In line with the recommendations of this Strategy, on May 8th, Treasury for the first time prohibited U.S. persons from providing accounting, trust and corporate formation, or management consulting services to any person located in the Russian Federation, and identified those services sectors as eligible for sanctions in the future.

The 2022 Strategy, along with the 2022 National Risk Assessments, will assist financial institutions in assessing the illicit finance risk exposure of their businesses and support the construction and maintenance of a risk-based approach to countering illicit finance for government agencies and policymakers. Treasury’s Office of Terrorist Financing and Financial Crimes prepared the 2022 Strategy, in consultation with office and bureaus in the Treasury Department, and the agencies, bureaus, and departments of the federal government that also have roles in combating illicit finance.

Click here to read the 2022 National Strategy for Combatting Terrorist and Other Illicit Financing.

WASHINGTON — The Internal Revenue Service today announced that interest rates will increase for the calendar quarter beginning July 1, 2022. The rates will be:

• 5% for overpayments (4% in the case of a corporation).
• 2.5% for the portion of a corporate overpayment exceeding $10,000.
• 5% for underpayments.
• 7% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus three percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus three percentage points, and the overpayment rate is the federal short-term rate plus two percentage points. The rate for large corporate underpayments is the federal short-term rate plus five percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during April 2022 to take effect May 1, 2022, based on daily compounding.

Revenue Ruling 2022-11PDF announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2022-23, dated June 6, 2022

Source: IRS

Washington – The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for March 2022.  The next release, which will report on data for April, is scheduled for June 15, 2022.

The sum total in March of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a net TIC inflow of $149.2 billion.  Of this, net foreign private inflows were $172.4 billion, and net foreign official outflows were $23.3 billion.

Foreign residents increased their holdings of long-term U.S. securities in March; net purchases were $20.2 billion.  Net purchases by private foreign investors were $29.4 billion, while net sales by foreign official institutions were $9.2 billion.

U.S. residents decreased their holdings of long-term foreign securities, with net sales of $2.8 billion.

Taking into account transactions in both foreign and U.S. securities, net foreign purchases of long-term securities were $23.1 billion.  After including adjustments, such as estimates of unrecorded principal payments to foreigners on U.S. asset-backed securities, overall net foreign purchases of long-term securities are estimated to have been $1.8 billion in March.

Foreign residents decreased their holdings of U.S. Treasury bills by $16.4 billion.  Foreign resident holdings of all dollar-denominated short-term U.S. securities and other custody liabilities increased by $12.1 billion.

Banks’ own net dollar-denominated liabilities to foreign residents increased by $135.2 billion.

Press notice TIC for May 2022

WASHINGTON — Today, the U.S. Department of the Treasury announced the first group of plans approved under the new round of the State Small Business Credit Initiative (SSBCI). The American Rescue Plan reauthorized and expanded SSBCI, which was originally established in 2010 and was highly successful in increasing access to capital for traditionally underserved small businesses and entrepreneurs. The new SSBCI builds on this successful model by providing nearly $10 billion to states, the District of Columbia, territories, and Tribal governments to increase access to capital and promote entrepreneurship, especially in traditionally underserved communities as they emerge from the pandemic. SSBCI funding is expected to catalyze up to $10 of private investment for every $1 of SSBCI capital funding, amplifying the effects of this funding and providing small business owners with the resources they need to sustainably grow and thrive. State governments submitted plans to Treasury for how they will use their SSBCI allocation to provide funding to small businesses, including through venture capital programs, loan participation programs, loan guarantee programs, collateral support programs, and capital access programs.

“This historic investment will help reduce the barriers that prevent small businesses and entrepreneurs from getting their ideas off the ground, building successful businesses, and creating jobs, especially in traditionally underserved communities where these opportunities are needed most,” said Deputy Secretary of the Treasury Wally Adeyemo. “Treasury is encouraged by these plans and their support for key industries, including manufacturing and the environmental sector.”

A White House report released earlier this month found that more Americans are starting new businesses than ever before. In 2021, Americans applied to start 5.4 million new businesses – 20 percent more than any other year on record. It also found that small businesses are creating more jobs than ever before, with businesses with fewer than 50 workers creating 1.9 million jobs in the first three quarters of 2021 – the highest rate of small business job creation ever recorded in a single year. The investments being made through SSBCI are a key part of the Biden Administration’s strategy to keep this small business boom going by expanding access to capital and by providing entrepreneurs the resources they need to succeed. The work Treasury has done through the implementation process to ensure SSBCI funds reach traditionally underserved small businesses and entrepreneurs will also be critical to ensuring the small business boom not only continues but also lifts up communities disproportionately impacted by the pandemic.

Today, Treasury is also announcing that it will have specialized programming to enable jurisdictions to share best practices for targeting investments in key industries and businesses owned by underserved entrepreneurs. Treasury strongly encourages jurisdictions to implement their plans in ways that support industries especially important to the U.S. economy – including small businesses that promote American manufacturing, strengthen critical supply chains, and invest in clean energy and renewables to secure our nation’s energy independence. Treasury has structured SSBCI to ensure that these funds will reach underserved small businesses and entrepreneurs in need of access to capital, including by providing $1 billion in incentive funds for jurisdictions that successfully reach underserved entrepreneurs and through its recent announcement of plans to deploy $300 million in technical assistance to reach businesses and entrepreneurs in need of assistance, including through the transfer of funds to the Minority Business Development Agency. Treasury continues to strongly encourage recipients to reach small businesses that provide jobs that pay a living wage, which will help American workers emerge stronger from the pandemic.

The first recipients under the SSBCI program plan to target key industries and small businesses in need of access to capital. Treasury intends to continue approving plans on a rolling basis. The following descriptions highlight some of the programs that Treasury has approved for these states.

• Hawaii, approved for up to $62,021,957, will launch new loan participation and credit enhancement programs, including HI-CAP Loans and HI-CAP Collateral, with two-thirds of its allocation. These programs will expand access to capital for underserved communities by lending to projects that will diversify Hawaii’s economy and lessen its reliance on tourism, which incurred high rates of business failures and unemployment during the COVID-19 pandemic. Hawaii will also operate a venture capital program, the HI-CAP Invest program, which will include investments in impact funds that target early-stage businesses focused on social or environmental change in Hawaii.
• Kansas, approved for up to $69,596,847, will operate a loan participation program, the GROWKS Loan Fund, and an equity program, the GROWKS Angel Capital Support Program, with over 80 percent of its funds. These programs will expand access to capital for underserved communities by providing companion loans and equity investments with varying levels of SSBCI support. Kansas estimates that approximately 40 percent of businesses supported will be women-owned and 20 percent will be minority-owned small businesses.
• Maryland, approved for up to $198,404,958, will operate eight loan and equity investment programs through Maryland Department of Housing and Community Development (DHCD), Maryland Department of Commerce and Maryland Technology Economic Development Corporation. Among the approved programs is the Maryland Small Business Development Financing Authority (MSBDFA), a program at the Department of Commerce, which will expand access to capital for underserved communities by targeting loans to underserved businesses. Maryland anticipates that 70 percent of new loans in the SSBCI-funded program will be provided to minority-owned businesses and 40 percent to women-owned businesses. Maryland will also use $17 million to fund the Neighborhood Business Works Venture Debt Program, which will expand access to capital for underserved communities by lending alongside venture capital equity in high-growth businesses located in qualified low-income communities, anchoring the businesses in these communities through federal tax incentives that require them to remain in low-income communities for several years.
• Michigan, approved for up to $236,990,950, has been an innovator in developing credit support programs given the challenges of the manufacturing sector there for the last several decades. Michigan’s top industry assisted in the previous iteration of SSBCI, in both lending and venture capital, was manufacturing. With these funds, the state will operate the Michigan Business Growth Fund Collateral Support Program with nearly one-third of its allocation. This existing program provides cash collateral accounts to lending institutions to enhance the collateral coverage of borrowers so that they qualify for loans. Historically the program has targeted industries with high wages and high job growth potential, such as manufacturing, medical device technology, engineering, and agribusiness. Michigan will expand the program to reach smaller service and retail businesses disproportionately hurt by COVID-19.
• West Virginia, approved for up to $72,104,798, will operate a seed capital co-investment fund with more than half of its allocation, increasing small businesses’ access to venture capital in a state with no resident venture capital firms and average annual venture capital investment well below the per-capita national average. The fund will focus on expanding access to capital for underserved communities by providing equity investments matched with private equity from angel investors or venture capital funds. Statewide and regional nonprofits and community development financial institutions (CDFIs) will partner with community banks and CDFIs to use the remaining balance of the funds for two loan programs that will serve the needs of West Virginia businesses.