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FinCEN Finds Iraq-based Al-Huda Bank to be of Primary Money Laundering Concern and Proposes a Rule to Combat Terrorist Financing

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WASHINGTON — Today, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a finding and notice of proposed rulemaking (NPRM) that identifies Al-Huda Bank, an Iraqi bank that serves as a conduit for terrorist financing, as a foreign financial institution of primary money laundering concern. Along with its finding, FinCEN proposed imposing a special measure that would sever the bank from the U.S. financial system by prohibiting domestic financial institutions and agencies from opening or maintaining a correspondent account for or on behalf of Al-Huda Bank.

Bad actors like Al-Huda Bank and its foreign sponsors fuel violence that threatens the lives of U.S. and Iraqi citizens alike while diverting funds that could otherwise support legitimate business and the economic aspirations of the Iraqi people. Treasury remains committed to its longstanding shared work with the Government of Iraq to strengthen the Iraqi economy and protect both the U.S. and Iraqi financial systems from abuse.

“Iraq has made significant progress in rooting out illicit activity from its financial system, but unscrupulous actors continue to seek to take advantage of the Iraqi economy to raise and move money for illicit activity,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “By identifying Al-Huda Bank as a key money laundering channel for destabilizing terrorist activity by Iran, proposing a special measure that will sever its correspondent banking access, and imposing sanctions on their CEO, we can protect the Iraqi financial system and its legitimate businesses, as well as the international financial system, from abuse by Iran and other illicit actors.”

“Evidence available to FinCEN has demonstrated that Al-Huda Bank served as a significant conduit for the financing of foreign terrorist organizations (FTOs),” said FinCEN Director Andrea Gacki. “We will continue to leverage the full range of our authorities to target terrorist financing while simultaneously supporting the legitimate use of the international financial system.”

As described in the finding, for years, Al-Huda Bank has exploited its access to U.S. dollars to support designated FTOs, including Iran’s Islamic Revolutionary Guard Corps (IRGC) and IRGC-Quds Force (IRGC-QF), as well as Iran-aligned Iraqi militias Kata’ib Hizballah (KH) and Asa’ib Ahl al-Haq (AAH). Moreover, the chairman of Al-Huda Bank is complicit in Al-Huda Bank’s illicit financial activities including money laundering through front companies that conceal the true nature of and parties involved in illicit transactions, ultimately enabling the financing of terrorism.

Since its establishment, Al-Huda Bank has been controlled and operated by the IRGC and the IRGC-QF. After establishing the bank, the Al-Huda Bank chairman began money laundering operations on behalf of the IRGC-QF and KH. Additionally, Al-Huda Bank affords access to the U.S. financial system to actors known to use fraudulent documentation, fake deposits, identity documents of the deceased, fake companies, and counterfeit Iraq dinar, providing opportunities to obscure the identities of the transaction counterparties to correspondent banking relationship providers.

To protect U.S. banks from Al-Huda Bank’s illicit activity, FinCEN is taking this action pursuant to Section 311 of the USA PATRIOT Act (section 311). Section 311 actions alert the U.S. financial sector to foreign institutions, such as Al-Huda Bank, that are of primary money laundering concern and through the public rulemaking process, if necessary, prevent direct and indirect access to the U.S. financial system. FinCEN has proposed a rule that would impose special measure five, which would prohibit domestic financial institutions and agencies from opening or maintaining a correspondent account for or on behalf of Al-Huda Bank.

This finding and NPRM are issued today alongside complementary Treasury actions to disrupt funding for Iran-aligned terrorist groups. Treasury’s Office of Foreign Assets Control (OFAC) designated Hamad al-Moussawi, the owner and chairman of Al-Huda Bank, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the IRGC-QF. Previously, on November 17, 2023, OFAC designated six key individuals affiliated with KH following the group’s attacks against United States personnel and partners in Iraq and Syria. On January 22, 2024, OFAC designated three additional key individuals affiliated with KH, a business used by KH to generate revenue and launder money, as well as an Iraqi airline that the IRGC-QF and its proxies in Iraq used to transport fighters, weapons, and money to Syria and Lebanon. Additionally, since the brutal attacks against Israel in October, OFAC has imposed five rounds of sanctions targeting Hamas-linked operatives and financial facilitators.

SECTION 311 SPECIAL MEASURES

Section 311 grants the Secretary of the Treasury authority, upon finding that reasonable grounds exist for concluding that one or more financial institutions operating outside of the United States is of primary money laundering concern, to require domestic financial institutions and domestic financial agencies to take certain “special measures.” The five special measures set out in section 311 are safeguards that may be employed to defend the United States financial system from money laundering and terrorist financing risks. The Secretary may impose one or more of these special measures in order to protect the U.S. financial system from such threats. Through special measure one, the Secretary may require domestic financial institutions and domestic financial agencies to maintain records, file reports, or both, concerning the aggregate amount of transactions or individual transactions. Through special measures two through four, the Secretary may impose additional recordkeeping, information collection, and reporting requirements on covered domestic financial institutions and domestic financial agencies. Through special measure five, the Secretary may prohibit, or impose conditions on, the opening or maintaining in the United States of correspondent or payable-through accounts for or on behalf of a foreign banking institution, if such correspondent account or payable-through account involves the foreign financial institution found to be of primary money laundering concern. The authority of the Secretary to administer the Bank Secrecy Act, including, but not limited to, section 311, codified at 31 U.S.C. § 5318A, has been delegated to the Director of FinCEN.

The NPRM as submitted to the Federal Register is currently available here. Written comments on the NPRM may be submitted within 30 days of publication of the NPRM in the Federal Register.

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Recording Loan Transactions and Interest Payments for Financial Accuracy

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Recording Loan Transactions and Interest Payments

Accurate financial record-keeping is essential for any business, especially when it comes to managing loan transactions and interest payments. Properly tracking these financial obligations ensures compliance with accounting standards, simplifies tax reporting, and provides a clear picture of a company’s financial health. Whether you are a small business owner or a financial professional, understanding the correct way to record loans and interest expenses is key to maintaining an accurate and transparent accounting system.

Recording the Initial Loan Transaction

When a business secures a loan, the first step is properly recording the transaction in its accounting records. The loan amount should be recorded as a liability on the balance sheet, reflecting the total borrowed. At the same time, the cash received from the loan increases the company’s assets, keeping the accounting equation balanced. Depending on the nature of the loan, it may be classified as a short-term or long-term liability. Short-term loans, which are payable within a year, appear under current liabilities, while long-term loans extending beyond a year are categorized under non-current liabilities. Proper classification is important for financial reporting and for understanding a company’s liquidity position.

Understanding Loan Repayments

Once loan repayments begin, each payment typically consists of two components: principal and interest. The principal portion reduces the outstanding loan balance, while the interest is recorded as an expense. Correctly distinguishing between these components is critical, as they have different accounting and tax implications. The principal repayment affects the balance sheet by reducing liabilities, whereas the interest expense is recorded on the income statement and can often be deducted from taxable income.

Interest Payments and Their Financial Impact

Interest payments represent the cost of borrowing money and must be recorded separately from the principal repayment. Since interest expenses impact profitability, accurate tracking is essential for financial planning and tax reporting. Businesses must ensure they correctly allocate payments between interest and principal based on the loan’s amortization schedule. Amortization schedules outline how much of each payment goes toward interest and how much reduces the principal. Over time, the interest portion of payments decreases while the principal repayment increases. Using accounting software can help automate these calculations and ensure accuracy in financial reporting.

Utilizing Amortization Schedules

Most business loans follow an amortization schedule, which details the breakdown of each payment over the loan’s lifespan. Early payments in the schedule typically consist of a higher proportion of interest, with the principal component increasing over time. Understanding this structure allows businesses to plan their cash flow more effectively. Many businesses use accounting software to automatically track and apply amortization schedules, reducing the risk of errors in recording interest and principal payments.

Reconciling Loan Transactions

Regular reconciliation of loan statements with accounting records is crucial to detect discrepancies early. Businesses should compare loan balances in their books against lender-provided statements to identify any missing or incorrect entries. This process ensures financial accuracy and helps businesses stay on top of their debt obligations. Consistent reconciliation also provides valuable insights into a company’s financial position, enabling better decision-making regarding debt management and future borrowing needs.

Tax Considerations for Interest Payments

One of the key advantages of properly recording interest expenses is the potential tax benefits. In most cases, interest paid on business loans is tax-deductible, reducing taxable income and overall tax liability. To maximize these benefits, businesses must maintain detailed and accurate records of all interest payments. Proper documentation is also essential in the event of a tax audit, as authorities may require evidence of legitimate business expenses.

Importance of Transparency in Financial Reporting

Accurate loan recording is not just about compliance—it also plays a crucial role in financial transparency. Investors, lenders, and stakeholders rely on a company’s financial statements to assess its stability and growth potential. Misreporting loan transactions can distort financial statements, leading to misinformed business decisions and potential regulatory issues. By maintaining clear and accurate loan records, businesses can ensure financial integrity and build trust with stakeholders.

Leveraging Accounting Software for Loan Management

Managing loan transactions manually can be complex and time-consuming. Many businesses invest in accounting software that automates the recording of loan payments, interest calculations, and amortization schedules. These tools help reduce human error and provide real-time insights into a company’s financial standing. Additionally, software integration with banking systems allows for seamless transaction tracking and automated reconciliation.

Final Thoughts: Ensuring Accuracy in Loan Accounting

Properly recording loan transactions and interest payments is essential for maintaining financial accuracy, ensuring regulatory compliance, and optimizing tax benefits. By understanding loan structures, utilizing amortization schedules, and reconciling financial records regularly, businesses can manage their debt efficiently. Leveraging accounting software further streamlines the process, reducing errors and improving overall financial transparency. Ultimately, accurate loan accounting empowers businesses to make informed financial decisions, maintain healthy cash flow, and support long-term growth.

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How to Navigate 65A Compliance for NYC Nonprofits

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What Every Organization Needs to Know about NYC 64A compliance

Navigating the regulatory landscape for nonprofits in New York City can be challenging, especially when working with city agencies. One of the most critical compliance requirements is Form 65A, which governs subcontractor approval processes. Understanding and adhering to these regulations is essential for maintaining funding, avoiding penalties, and ensuring the smooth operation of nonprofit programs.

Understanding Form 65A and Its Purpose

Form 65A is a compliance requirement for nonprofit organizations that engage in third-party contracts while receiving funding from New York City agencies. This form ensures transparency and financial accountability when nonprofits subcontract work to external vendors. The city uses this process to monitor subcontractor relationships and verify that funds are used responsibly. Nonprofits that fail to comply risk payment delays, contract disputes, and potential funding losses.

The $25,000 Threshold for Subcontractor Approval

The most important aspect of Form 65A is its threshold requirement. Any nonprofit that enters into a subcontractor agreement exceeding $25,000 must seek formal approval from the city. This applies not only to single contracts but also to multiple agreements with the same vendor if their total value surpasses this threshold. Understanding this rule is crucial for financial planning and vendor management, as failing to obtain approval can lead to significant administrative and financial consequences.

Registering Subcontractors and Required Documentation

The first step in the Form 65A compliance process is registering subcontractors in the City’s Payee Information Portal (PIP). Nonprofits must submit comprehensive details about the proposed vendor, including contract terms, service descriptions, and maximum payment values. If a contract exceeds $25,000, nonprofits must also provide proof of a competitive bidding process. Typically, this requires three bids from potential vendors unless the organization chooses a pre-approved Essensa network vendor. Proper documentation ensures a smooth approval process and minimizes the risk of rejection.

Key Timeline Considerations for Approval

Timeliness is essential when managing Form 65A submissions. Many New York City agencies require a minimum of 30 days to review and approve subcontractor agreements. Because of this, nonprofits should plan ahead and avoid engaging subcontractors before obtaining official authorization. In many cases, approvals are processed through Passport, the city’s digital procurement system, or via written confirmation. Organizations that fail to account for these processing times risk delays in project implementation and funding disbursement.

Risks of Non-Compliance and Financial Consequences

Failure to comply with Form 65A requirements can result in serious repercussions. If a nonprofit engages a subcontractor without prior approval, city agencies have the right to withhold payment for services rendered. This can lead to severe cash flow issues, disrupting operations and potentially jeopardizing critical programs. Non-compliance may also damage an organization’s reputation and eligibility for future city contracts. By prioritizing compliance, nonprofits can avoid these risks and maintain financial stability.

Best Practices for Ensuring Compliance

To simplify compliance and reduce administrative burdens, nonprofits should adopt best practices for managing subcontractor agreements. Key strategies include:

  • Submitting complete documentation upfront – Providing all necessary information at the time of submission minimizes delays caused by incomplete paperwork.
  • Maintaining organized contract records – Keeping detailed records of all third-party agreements ensures that organizations can track contract values and submission deadlines.
  • Aligning subcontractor terms with city contract requirements – Ensuring that subcontractor agreements reflect the terms and conditions of the primary city contract helps avoid conflicts during the approval process.
  • Implementing a vendor management system – Tracking all agreements and cumulative spending with subcontractors can prevent unintentional violations of the $25,000 threshold.

Understanding Second-Tier Subcontractor Approval

Many nonprofits overlook the fact that second-tier subcontractors—vendors hired by an approved subcontractor—must also be reviewed under Form 65A requirements. Organizations should establish clear vendor oversight protocols to ensure that all subcontractors, including those hired indirectly, comply with city regulations. By proactively managing these relationships, nonprofits can prevent compliance issues before they arise.

Staying Compliant While Advancing Your Mission

For nonprofits working with New York City agencies, Form 65A compliance is a crucial aspect of financial and operational management. By understanding the approval process, adhering to documentation requirements, and maintaining strict oversight of subcontractor agreements, organizations can avoid funding disruptions and regulatory penalties. With a proactive approach to compliance, nonprofits can focus on their mission—serving communities and making a positive impact—without unnecessary administrative hurdles.

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How to better Handle Employee Reimbursements for Efficiency and Accuracy

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Handling Employee Reimbursements

In today’s fast-paced business environment, managing employee reimbursements effectively is essential for financial accuracy, compliance, and employee satisfaction. A well-structured reimbursement process ensures that employees are reimbursed fairly and promptly while minimizing administrative burdens and preventing financial mismanagement. Below are the best practices for streamlining your employee reimbursement process.

Establish Clear Reimbursement Policies

A transparent and well-documented reimbursement policy is the foundation of an efficient process. Clearly define what expenses are eligible for reimbursement, such as travel costs, office supplies, or client meetings. Outline submission deadlines, required documentation, and approval procedures. Ensure these guidelines are easily accessible to all employees, either through an internal portal or employee handbook. Consistency in enforcing policies helps prevent misunderstandings and reduces the risk of fraudulent claims.

Leverage Digital Expense Management Systems

Manual expense reporting can lead to errors, delays, and inefficiencies. Implementing digital expense management software automates the reimbursement process, making it faster and more accurate. These systems allow employees to submit expenses in real-time, track approvals, and receive payments seamlessly. Automation reduces paperwork, minimizes human error, and improves financial transparency.

Set Reasonable Submission Deadlines

Encouraging employees to submit reimbursement claims promptly helps maintain accurate financial records and ensures timely payments. Setting deadlines, such as requiring monthly or quarterly expense reports, prevents last-minute rushes and helps the finance team manage cash flow effectively. Communicate these deadlines clearly and send reminders to employees to avoid delays in processing.

Require Detailed Documentation for Expense Claims

Proper documentation is crucial for compliance and financial accountability. Employees should provide itemized receipts, invoices, or proof of transactions for each claimed expense. Additionally, requiring a brief description of the expense purpose ensures alignment with company policies and tax regulations. Standardizing documentation requirements minimizes disputes and simplifies audits.

Implement a Multi-Level Approval System

A tiered approval process adds an extra layer of oversight while maintaining efficiency. For example, low-value reimbursements can be approved by direct supervisors, while high-value claims require review from senior management or the finance department. This system ensures that routine expenses are processed quickly while larger expenditures receive the necessary scrutiny.

Conduct Regular Audits for Compliance and Fraud Prevention

Periodic audits of reimbursement claims help identify trends, ensure policy adherence, and detect potential fraud. Reviewing expenses regularly allows businesses to spot inconsistencies, prevent duplicate claims, and adjust policies as needed. Automated auditing tools can flag suspicious activity, reducing the risk of financial misconduct.

Provide Employee Training on Reimbursement Policies

Many reimbursement issues stem from a lack of understanding of company policies. Conduct training sessions or provide instructional materials to educate employees on reimbursement procedures, policy updates, and best practices for submitting claims. Ensuring employees are well-informed helps prevent errors and reduces the need for excessive back-and-forth communication.

Offer Direct Deposit for Faster Reimbursements

Processing reimbursements through direct deposit instead of issuing paper checks accelerates payments and improves employee satisfaction. Employees appreciate timely reimbursements, especially for significant out-of-pocket expenses. Direct deposit also streamlines administrative work, reducing the time and costs associated with manual check processing.

Integrate Reimbursement Processes with Accounting Systems

For seamless financial management, the reimbursement process should integrate with the company’s accounting software. This ensures accurate financial reporting, simplifies reconciliation, and reduces manual data entry errors. Integration also allows businesses to track reimbursement expenses in real time, aiding in budgeting and forecasting.

Implement a Corporate Card Program for Frequent Business Expenses

For employees who frequently incur business expenses, issuing corporate credit cards can simplify the reimbursement process. Corporate cards eliminate the need for employees to use personal funds and wait for reimbursement. Additionally, transactions are automatically recorded in expense management systems, reducing paperwork and improving tracking. Businesses can also negotiate better terms with corporate card providers, including cashback rewards and expense categorization features.

Building a Transparent and Efficient Reimbursement System

An effective employee reimbursement system promotes financial transparency, ensures compliance, and enhances employee satisfaction. By implementing clear policies, leveraging technology, enforcing proper documentation, and streamlining approval processes, businesses can create a reimbursement structure that minimizes delays and prevents errors. When employees trust that their expenses will be reimbursed efficiently, they can focus on their work without financial concerns.

By following these best practices, businesses can optimize their reimbursement processes, reduce administrative burdens, and maintain financial integrity while supporting employees in their professional activities.

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