On January 1, 2021, the US Congress passed the National Defense Authorization Act (NDAA) 2021, addressing pressing concerns related to national security. Included within the act were significant anti-money laundering/countering the financing of terrorism (AML/CFT) reforms, known as the Anti-Money Laundering Act (AMLA) of 2020. These reforms amended numerous provisions in the USA PATRIOT Act of 2001 and the Bank Secrecy Act (BSA), marking the first major overhaul of the US anti-money laundering system in decades.
Financial institutions will feel the impact of these reforms, particularly as new business types are added to the AML/CFT compliance spotlight. This article will explore the major provisions of the AMLA 2020 and its implications for financial institutions.
Key Provisions of the AMLA 2020
Disclosure of Ultimate Beneficial Ownership (UBO)
The AMLA requires certain companies to disclose beneficial ownership information to the US Financial Crimes Enforcement Network (FinCEN). This information includes the beneficial owner’s full name, date of birth, current address, and unique identifying number from a valid identification document. The goal is to improve transparency and help national agencies and financial institutions combat money laundering and terrorist financing.
Enhanced authority for regulators to seek documents from foreign institutions
Section 6308 of the AMLA enables the Treasury Department and the Department of Justice to request additional documents from foreign banks that maintain a correspondent account in the US. This will allow them access to records relevant to certain investigations, as well as the foreign banks’ records related to the correspondent account.
Expansion of the AML/CFT regime to emerging financial markets
The AMLA broadens the definition of financial institutions and money transmitters to include service providers involving “value that substitutes for currency,” such as cryptocurrencies.
Higher penalties for BSA and AML violations
The AMLA grants the Secretary of the Treasury the power to impose additional civil monetary penalties for certain repeat violators of AML laws. These penalties can amount to three times the profit derived or loss avoided as a result of the violation or two times the maximum penalty for the violation.
Sharing Suspicious Activity Reports (SARs) with foreign agencies
The AMLA includes a three-year pilot program allowing US financial institutions to share SARs with foreign branches, subsidiaries, and affiliates, except for those in jurisdictions subject to US sanctions.
Annual reporting of all settlements involving BSA
Under section 6311 of the AMLA, the Department of Justice is required to report all deferred prosecution agreements and non-prosecution agreements related to actual or suspected BSA violations to the Congressional judiciary and banking committees annually.
Modernization of the AML/CFT regime through technology and innovation
The new legislation promotes streamlining low-value processes and eliminating obsolete regulations by appointing an Innovation Officer at FinCEN and each federal functional regulator. It also provisions the creation of a BSA Advisory Group subcommittee on innovation and technology, a mandatory financial technology assessment by the Treasury, and a requirement for FinCEN to maintain emerging technology experts. FinCEN must also set standards for financial institutions when using or testing technology for BSA compliance and establish streamlined processes for filing certain categories of SARs.
New BSA/AML Program Requirements
The AMLA introduces several provisions that significantly change the landscape for financial institutions implementing BSA/AML programs. They include:
- FinCEN providing financial institutions with information about financial crime concerns and patterns.
- The Department of Treasury establishing national AML priorities, which financial institutions should incorporate into their risk-based programs to comply with BSA requirements.
- FinCEN periodically disclosing to financial institutions a summary of useful SARs information to the extent practicable.
- FinCEN publishing information relating to emerging money laundering patterns and trends, with financial institutions' BSA/AML programs being evaluated based on their incorporation of FinCEN’s published threat patterns and trends.
The enactment of the AMLA marks the beginning of a new era of enhanced AML/CFT compliance in the US. Financial institutions should anticipate a wave of regulations and guidance in the coming months and start applying the necessary modifications to their AML compliance programs.
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