The Anti-Money Laundering Act (AMLA) was enacted as part of the National Defense Authorization Act for Fiscal Year 2020 (NDAA) and included the most substantial changes to US anti-money laundering (AML) law since the US Patriot Act of 2001. While the new law clarifies and streamlines certain Bank Secrecy Act (BSA) and AML obligations, it also imposes specific new regulatory requirements.
Key provisions of the AMLA include:
- Establishing new beneficial ownership requirements for certain entities doing business in the US designed to combat money laundering through shell companies.
- Requiring the US Treasury to establish National AML and Combating the Financing of Terrorism (CFT) priorities.
- Increasing AML whistleblower awards and expands whistleblower protections.
- Modernizing the statutory definition of “financial institution” to include, consistent with existing Financial Crimes Enforcement Network (FinCEN) regulations, entities that provide services involving “value that substitutes for currency” – a category that includes stored and virtual currency instruments.
- Enhancing penalties for BSA and AML violations.
- Streamlining and modernizing BSA and AML requirements and regulations.
- Improving coordination and cooperation among international, federal, state, and tribal AML law enforcement agencies.
The following is a summary of some of the most relevant aspects of the AMLA for community banks and credit unions:
The AMLA includes the Corporate Transparency Act (CTA), which is intended to discourage the use of shell corporations to disguise and move illicit funds. The CTA requires certain US entities and entities doing business in the US to report beneficial ownership information to FinCEN.
FinCEN will maintain a national registry of beneficial ownership information, which will not be public. Law enforcement agencies will be able to obtain beneficial ownership information via court order. Financial institutions will be able to access the information with their customers’ permission.
- The new beneficial ownership requirements apply to “beneficial owners” of “reporting companies” with several exceptions.
- A reporting company includes an entity created under the US or Indian tribe’s laws or a foreign entity registered to do business in the US.
- A beneficial owner is defined as any entity or individual who (directly or indirectly) exercises substantial control over the entity or owns or controls 25% or more of the entity’s ownership interest.
- The beneficial owner definition excludes several categories of entities and individuals, including most creditors and certain individuals acting as custodians or agents.
- The CTA does not define “substantial control” and delegates authority to FinCEN to define the term.
The CTA provides an extended timeframe for compliance with the new beneficial ownership reporting requirements. In addition, existing entities are not required to report beneficial ownership information until two years after the effective date of the applicable regulations promulgated under this law. Reporting companies are subject to ongoing obligations to report updated changes in beneficial ownership information not later than one year after the date of the change.
The Secretary of the Treasury is required to establish AML priorities and update them at least every four years. Financial institutions will be required to incorporate those priorities into their AML programs and evaluate them on that basis.
Financial institutions will be permitted to enter into collaborative arrangements with other financial institutions relative to BSA/AML compliance. Such activities might include participating in a common activity or pooling resources.
The Secretary of the Treasury is required to lead a review of existing BSA regulations and guidance and update them as appropriate. Beginning January 2, 2022, the Secretary is required to provide an annual report to Congress regarding BSA/AML, including findings, administration, and recommendations.
- Treasury must review Currency Transaction Reporting (CTR) and Suspicious Activity Reporting (SAR) requirements by January 2, 2022, and at least every five years for a 10 year duration period. Such a review would include dollar thresholds, streamlining and automating certain SAR filings, and proposed changes to existing requirements.
- FinCEN will be tasked with sharing threat patterns and trend information with financial institutions.
- FinCEN Exchange will be created to establish a voluntary public-private information-sharing partnership between law enforcement and financial institutions.
- Federal bank examiners will be required to participate in annual BSA/AML training.
While much is known relative to the AMLA requirements, much will be determined as Treasury and FinCEN seek to implement this far-reaching legislation’s new requirements.
CRI’s BSA/AML professionals will continue to monitor the AMLA developments and implementation for both our current and prospective financial institution clients. For more information, contact your local CRI professional.