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By Richard Hill
Sigal Mandelker, confirmed in June to head the Treasury Department’s anti-terrorism and anti-money laundering efforts, now manages a portfolio notable more for continuity than radical change between administrations.
Nevertheless, Mandelker, who returns to the federal government from a Proskauer partnership, will have to chart her own course in a number of areas, including balancing U.S. and EU anti-money laundering rules and handling economic sanctions in an increasingly challenging environment.
As director of the Office of Terrorism and Financial Intelligence—TFI—Mandelker will also have to contend with the growing complexity and breadth of terrorist financing and sanction evasion, former Department of Homeland Security Secretary Michael Chertoff told Bloomberg BNA. He worked with Mandelker at both the Justice Department and DHS during the Bush administration.
“Part of it is because the adversaries are getting smarter—there’s more online activity, and you’re now dealing with things like bitcoin,” Chertoff, co-founder and executive chairman of business and security consulting firm Chertoff Group, said. “But also, as we increase the use of sanctions, that means there’s more targets you have to look at.”
Mandelker’s staff will have to increase its use of “machine intelligence”—artificial intelligence and data analytics, for example—in order to “multiply what they can do in terms of following the money,” Chertoff said.
Mandelker was confirmed by the Senate 96-4 in June. Before her stint at Proskauer, she served as a deputy assistant attorney general in the Justice Department’s Criminal Division and counselor to the Homeland Security secretary. She previously clerked for Judge Edith Jones of the U.S. Court of Appeals for the Fifth Circuit and for U.S. Supreme Court Justice Clarence Thomas.
At her May confirmation hearing before the Senate Banking Committee, Mandelker said her highest priority would be focusing on areas and entities that pose the greatest threat, such as North Korea, Iran, the Islamic State, Syria, and Russia. She said she would consider how to increase pressure “using a wide array of tools, not just sanctions.”
Mandelker replaces Adam Szubin, who held the job on an acting basis. His nomination by President Barack Obama never received a Senate floor vote. “Generally, people from both sides of the aisle want to see continuity in this position,” said Seetha Ramachandran, former head of the Justice Department’s Money Laundering and Bank Integrity Unit and now a partner at Schulte Roth & Zabel LLP, New York.
The Treasury Department declined a request to interview Mandelker.
Internationally, Mandelker may seek to influence how EU banks doing business in the U.S. balance Europe’s strict data-privacy requirements with the U.S.’s “somewhat stricter” AML requirements, William Barry, an anti-money laundering attorney at Miller & Chevalier, Washington, said
“What I’m seeing right now is an increase from the U.S. regulatory perspective in AML surveillance and enforcement, and at the same time a heightened focus on the EU side on data privacy,” he said. New, stricter data privacy laws are scheduled to go into effect in Europe in May 2018.Recognizing and balancing the competing agendas “will affect how the undersecretary moves forward with her agenda,” Barry said. “It is incumbent on U.S. regulators to work with the banking industry to make sure banks are thinking carefully about how they can satisfy their obligations to both regimes,” he said.Navigating between U.S. and EU regulatory regimes highlights a broader topic Mandelker and the White House will have to consider: how the U.S. engages with overseas regulators. Mandelker may seek to coordinate with her foreign counterparts, or to “lead the world by example but not necessarily by coordination,” said Brian Egan, a Steptoe & Johnson, Washington, partner. Egan advised one of Mandelker’s predecessors, David Cohen.
The Obama administration increased its international anti-money laundering and anti-terrorism financing coordination efforts, but the Trump administration has signaled in other diplomatic areas a desire to pull back from such outreach. “I would be surprised,” if the U.S. and Mandelker pulled back, said Egan, “but I don’t think it’s out of the question.”
Two of the main Treasury Department units under Mandelker are the Office of Foreign Assets Control (OFAC), which implements sanction on foreign bodies, and the Financial Crimes Enforcement Network (FinCEN), which leads the government’s AML efforts.FinCEN has been ratcheting up fines for AML non-compliance since President George W. Bush’s second term, leading banks to complain about rising compliance costs. Still, they shouldn’t expect a reprieve under Mandelker, Egan said. While Mandelker probably will continue to enforce AML rules aggressively, she may be more open than her Obama-administration predecessors to considering the concerns of financial institutions, said Cadwalader, Wickersham & Taft LLP partner Joseph Moreno. “I think she’ll be a bit more cognizant of how any existing or new anti-money laundering rules affect the private sector,” said Moreno, a former federal prosecutor in the Justice Department’s National Security Division. “She’ll do a good job balancing the effectiveness of rules with the compliance burden. I think she’ll be much more receptive to feedback from the private sector.” Meanwhile, the banking industry is still waiting “for a coherent statement” about how the Trump White House will use economic sanctions against foreign countries seen as adversaries, Barry said.Mandelker will have a major role in sanctions policy, Moreno said. “If there are five or six key people at the table, she’ll be one of them. My guess is, most of her time is going to be consumed by sanctions-related issues.”
The new undersecretary also may be positioned to make internal changes to TFI, which is generally unchanged since its creation in 2004, Moreno said. “I wouldn’t be surprised if [Mandelker] takes a good look at how [TFI is] structured,” he said.Moreno noted that TFI has several other policy and operational units in addition to OFAC and FinCEN. “I can definitely see her taking steps to making TFI work as efficiently as possible,” he said, noting some overlap among the various components.
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