By Bachir Nakib, ACAMS Faculty Member
UBO "Ultimate Beneficial Ownership register, and
AML Law Enforcement priorities,
Strengthens the government’s ability to seek foreign bank records,
Updates the BSA’s whistleblower program, and may precipitate other changes affecting how financial institutions comply with the BSA.
Corporate Transparency Act
The USA Congress enacted the Corporate Transparency Act—which is part of the AML Act—to curtail bad actors’ use of shell corporations to avoid detection while committing fraud, funding terrorism, or engaging in other illicit activity. Section 6403 requires corporations, limited liability companies, and similar entities to file reports with and keep current information about their beneficial ownership with the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Notably, many financial institutions, including registered issuers, federal and state credit unions, broker dealers, and qualifying larger companies, are exempt from this reporting requirement, which is directed at smaller businesses and shell companies.
Foreign bank records
Section 6308’s expansion of the subpoena power strengthens the ability of the Treasury and the DOJ to conduct investigations involving foreign banks and to pursue enforcement actions, as they will now have an easier path to the access and use of documents that previously were difficult to obtain.
The AML Act also updates and strengthens the BSA’s whistleblower program. The BSA currently provides for whistleblower awards of the lesser of $150,000 or 25% of the penalties imposed in a related enforcement action. These incentives have been said to be insufficiently attractive to generate the interest of potential whistleblowers. Under the AML Act, the whistleblower program has more teeth: persons who voluntarily provide actionable information regarding BSA violations to the Treasury or DOJ are eligible for up to 30% of collected fines in a related enforcement action imposing more than $1 million in monetary sanctions.
The whistleblower program in the AML Act is modeled after the program implemented by the US Securities and Exchange Commission (SEC) following the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. That program has led to the SEC’s recovery of more than $2 billion in monetary sanctions due to whistleblower tips. The whistleblower program in the AML Act may have a similarly far-reaching impact.
Modernization and evolving threats
One of the AML Act’s stated purposes is to modernize anti-money laundering laws to respond “to new and emerging threats.” In pursuit of that goal, Section 6216 requires the Treasury to conduct a formal review of the BSA regulations to ensure current requirements continue to be appropriate and beneficial and identify regulations that may be outdated or otherwise may not comport with the risk-based anti-money laundering compliance structure. The Treasury must solicit public comment in the course of this review and report its findings to Congress within one year of the AML Act’s enactment.
The new AML Act also aims to encourage technological innovation and financial institutions’ use of new technology to combat new threats related to money laundering and the financing of terrorism. Section 6207 creates a Subcommittee on Innovation and Technology tasked with encouraging and supporting technological innovation, which will include representatives from financial institutions subject to the BSA. There also will be Innovation Officers, who will be responsible for outreach to regulators, law enforcement agencies, and financial institutions and for providing technical assistance and guidance related to financial institutions’ implementation of new technologies.
To assist in this assessment, Section 6101 requires the US Treasury, along with the Attorney General, Federal and state financial regulators, and national security agencies, to establish formal law enforcement priorities for anti-money laundering and countering the financing of terrorism. The public establishment of these priorities is intended to communicate evolving risks to financial institutions and help them appropriately allocate available compliance resources.
In additional to the formalization of the FinCEN Exchange, the AML Act includes other provisions aimed at increasing information sharing. For example, Section 6212 requires the Treasury to issue rules establishing a pilot program that allows financial institutions to share information contained in suspicious activity reports with its foreign branches, subsidiaries, and affiliates to combat money laundering and the financing of terrorism. However, financial institutions still may not share this information with affiliates in China, Russia, states subject to US sanctions, state sponsors of terrorism, and other states designated by the Treasury.
The AML Act also includes other provisions that may affect the investigation and enforcement of potential BSA violations. For instance, the AML Act:
In addition, an increase in the number of proposed rules related to anti-money laundering is likely, as several sections of the AML Act require or permit public comment. Financial institutions should stay apprised of the proposed rules and may wish to submit comments for consideration.
1. “William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021,” H.R. 6395 available at https://www.govtrack.us/
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