Dive Brief:

• Citi has hired Kenneth Blanco, the director of the Financial Crimes Enforcement Network (FinCEN), to serve as chief compliance officer in the bank’s newly created financial crimes unit, The Wall Street Journal and Bloomberg reported Friday.
• Blanco will leave FinCEN on April 9, and Michael Mosier will begin serving as the regulator’s acting director April 11, the agency said Friday in a statement.
• The announcement of a change in leadership at the regulator came a day after FinCEN issued a notice seeking public comments to help the agency implement new rules on reporting the identity of corporations’ beneficial owners.

Dive Insight:

Citi’s hiring of Blanco comes as the bank is retooling its risk management, data governance and internal controls in light of a $400 million fine the Office of the Comptroller of the Currency (OCC) levied against it in October. The bank said last year it would integrate its anti-money laundering (AML), sanctions and anti-bribery teams into a new financial crimes unit, according to Bloomberg.

Generally, financial institutions wait until a regulator is out of office before hiring. Citi, however, knows the OCC and the Federal Reserve are both watching personnel moves intensely and that the OCC reserves the right to make changes to the bank’s senior management if it thinks Citi is moving too slowly.

Blanco’s flight to the private sector follows at least two similar moves by ex-regulators in the past week. Market maker Citadel Securities announced Thursday it hired former Commodity Futures Trading Commission (CFTC) Chairman Heath Tarbert as its chief legal officer, according to the Financial Times. Coinbase, meanwhile, hired Brett Redfearn to run its capital-markets group, The Wall Street Journal reported Tuesday. Redfearn until December was director of the Securities and Exchange Commission’s division of trading and markets.

Blanco has led FinCEN since December 2017 and previously served for 29 years at the Justice Department, including as deputy assistant attorney general.

Mosier, meanwhile, will rejoin FinCEN after having barely left. He took a position last month in the office of Treasury Deputy Secretary Wally Adeyemo before Adeyemo was confirmed by the Senate, The Wall Street Journal reported. Mosier had served as FinCEN’s deputy director and digital innovation officer since February 2020. He previously worked as chief technical counsel at the crypto firm Chainalysis.

Among Mosier’s first priorities at FinCEN will be creating the FinCEN database into which all U.S. corporations will have to register the identities of their beneficial owners. The Anti-Money Laundering Act of 2020, enacted in January as part of the National Defense Authorization Act, is meant to keep criminals from using shell companies to hide their ill-gotten gains. But it also aims to streamline the "suspicious activity report" system — under which a pattern or type of transaction will trigger alerts that banks must flag to the Treasury Department.

The measure mandates that the Treasury set priorities for AML policy among law enforcement, bank supervisors and banks, and establish communication channels among all three. It also lowers banks' compliance costs by passing on to corporations the burden of collecting beneficial ownership information and supplying it to law enforcement in the event of an investigation.

Public comments, to be accepted through May 5, could help FinCEN determine how data on beneficial owners can be verified and what obligations banks will have regarding the database.

Mosier returns to FinCEN with an AML background. Before joining the regulator, he served as an associate director in the Treasury Department’s Office of Foreign Assets Control. He also was a deputy chief in the Justice Department’s money laundering and asset recovery unit and served as director for transnational organized crime on the White House National Security Council.