WASHINGTON — Jennifer Shasky Calvery, the new director of the Financial Crimes Enforcement Network, wrote the book on money laundering — literally.
As an up-and-coming prosecutor at the Justice Department in the early 2000s, Shasky was tasked with deconstructing a multi-billion-dollar money laundering scheme at Bank of New York involving suspected Russian mafia money.
She eventually wrote an internal Justice Department book describing how the money was laundered — often through shell companies designed to mask the owner's identity — and trained FBI agents and prosecutors in rooting it out in the future.
For Shasky, who took the reins at Fincen last month, the case sparked a keen interest in tracking the increasingly sophisticated methods criminals use to move their money via shell companies through the United States.
"I think the passion comes from seeing the effects of the groups that are laundering the money, and the things they're doing to harm us here in the United States and harm people around the world," she said. "There's no question in my mind that getting to their money is the way to get to these organizations."
In the years that followed, Shasky testified before Congress on the need for more corporate transparency and the dangers that shell companies pose for the financial system.
As the new Fincen director, her top priority is finalizing a rule that would require banks to beef up due diligence of accounts held by the so-called nontransparent entities.
"The shell company problem has been a perennial problem and something that I have personally dealt with from the very beginning of my career," she told American Banker in her first interview as Fincen director. "For 15 years, we've been watching organized crime and others just consistently use shell companies to launder money."
Shasky was appointed the new head of Fincen in August, after former director James Freis was dismissed following a split with Treasury leadership.
Her appointment comes in the wake of a handful of high-profile money-laundering cases that have prompted the industry to refocus on Bank Secrecy Act compliance following a period with few enforcement actions during the financial crisis.
"They know it's a big issue …and I think they're feeling the pressure to get it right," Shasky said of her early discussions with industry. "And I'm confident that the vast majority of financial institutions out there are working their hardest to get it right."
Despite her enforcement background, the former prosecutor said she plans to take a balanced approach to Fincen's four main responsibilities of producing financial intelligence, supervising banks and nonbanks, enforcing the laws and developing regulatory policies.
Where there are BSA violations, the agency will use enforcement actions to show the industry that it is serious about compliance, Shasky said. But with just 325 employees, they will have to prioritize.
"For us to be as successful as possible, it is abundantly clear that we are going to have to really focus on our own efficiency and then very carefully pick out what our priorities are going to be and where can we make the biggest difference in this space with the least amount of people," she said.
In addition to concerns about stepped up enforcement, industry groups say Fincen's advanced notice of proposed rulemaking regarding shell companies contemplates a significant expansion of the requirements for customer due diligence — specifically, identifying the beneficial ownership of accounts — that would impose significant compliance costs on institutions.
And if that is costly, ask yourself a simple question: why isn't it costly to identify the beneficial owners of the millions of accounts already in banks? Could it be that owners don't want to say who the beneficial owner is? Because we might want to inquire about how the Medillin Cartel treasurer got the money?