New Fincen Director Makes Shell Corps Her Top Priority

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 they said it is simply not feasible to impose broad-based rules, as opposed to risk-based ones, on financial institutions without comparable international requirements.

The proposed rule is part of a three-pronged approach by the Treasury Department's Office of Terrorism and Financial Intelligence that includes enacting federal legislation to remove the anonymity of shell corporations, and supporting similar reforms around the world.

It was also one of the major policy pushes Shasky focused on in her last job as chief of the Justice Department's Asset Forfeiture and Money Laundering Section.

"It's not yesterday's threat, it's today's threat," Shasky said. "The things that we're looking at and facing as a country, from the Mexican drug cartels and the laundering of their money, to terrorist financing, which is still a major issue, to global corruption — those are today, now, national security threats."

At AFMLs, Shasky was responsible for the annual forfeiture of more than $1.5 billion from financial institutions, including Barclays Bank and ING Bank. Prior to that, she spent two years in the Office of the Deputy Attorney General, focusing on policies combating international organized crime, a huge component of which was going after money laundering.

She worked on what ultimately became the sanctions program against transnational crime now administered by Treasury's Office of Foreign Assets Control, and set up an intelligence operations center called the International Organized Crime Operations Center, which uses BSA data from Fincen to track the money that supports organized crime.

Shasky got her start 15 years ago in DOJ's Organized Crime and Racketeering Section, focused largely on money laundering operations supporting Russian organized crime that were prevalent in the years following the break-up of the Soviet Union.

An aspiring FBI agent in college, Shasky beefed up her resume by learning Russian — she was fluent, but is a bit rusty these days — and studying Russian affairs, just as the Berlin Wall was coming down. The FBI had a hiring freeze, so she went to law school and got her first job as a prosecutor at the Justice Department.

A former "customer" of Fincen's financial intelligence, Shasky will now be the bureau's principal liaison with law enforcement and bank regulators on anti-money laundering and terrorist financing, sharing the massive datasets that financial institutions provide.

She steps into the role just as the agency is finalizing a $120 million upgrade of its Bank Secrecy Act IT system that will allow it to search millions of records, flag potential violations and analyze trends in a fraction of the time. A recent inspector general's report found that the modernization project was on-time and within budget, and included no recommendations — a rare feat in Washington.

"As a user and someone from outside the organization, it had outlived its technology relevance in many respects," Shasky said of the old system. "But to go from that to now just having really the Ferrari of IT systems, our early day challenge here is to figure out how to drive it, how to go from a bicycle to driving this Ferrari. What we're going to be able to do with it is just amazing."