5 AML regulations set to shape financial crime in 2024

Each year brings a host of consequential new anti-money laundering (AML) regulations, and 2024 is no exception. Various regulators plan a raft of reforms with significant consequences. We’ve selected five key changes for this article – due to the global significance of the markets they affect, alongside the potential for these reforms to be enacted by other regulators, enhancing their reach.  

The Corporate Transparency Act (US)

The Corporate Transparency Act (CTA) introduces requirements around beneficial ownership transparency in the US and came into force on January 1, 2024. It requires firms to report their beneficial owners to the government, setting out requirements around how this information should be recorded and reported. Beneficial ownership information includes (BOI): full name, date of birth, current address, and a distinctive identification number.

The Act applies to US and foreign entities doing business in the US. Company directors who do not comply could pay up to $500 per day (up to $10,000) and face jail time of up to two years. Businesses will need to update FinCEN with any material changes. 

A new AML package for Europe (EU)

The EU’s latest AML package is anticipated to be agreed upon in Q1 2024, followed by a three-year transition period. It was introduced after a series of AML/CFT scandals that rocked members of the European Union and to harmonize AML/CFT measures across the EU. The package consists of four separate instruments: (1) A regulation to establish an AML Authority (AMLA), which is anticipated in 2024; (2) A new 6th Anti-Money Laundering Directive for countries to improve their domestic AML/CFT frameworks; (3) A new piece of regulation providing more clarity and guidance for obliged entities required to meet AML/CFT obligations, and (4) An updated Transfer of Funds Regulations (TFRs) clarifying requirements for information accompanying crypto asset transfers. The TFRs were adopted in June 2023. 

Economic Crime Plan 2 (UK)

The UK published an Economic Crime Plan 2 (ECP2) in 2023. It commits the government to decreasing money laundering and increasing asset recovery, tackling kleptocracy and combatting sanctions evasion, reducing fraud, and lowering the threat of international illicit finance to the UK and its interests. The ECP2 indicated it would increase resources for law enforcement, expand the National Crime Agency (NCA)’s capacity to fight corruption through its Combatting Klpetocracy Cell (CKC) and support the Crown Dependencies and British Overseas Territories in introducing beneficial ownership registries. It also detailed “cross-cutting system reforms” with a focus on information sharing, data, and technology, boosting law enforcement capacity via a public-private workforce strategy, reforming the criminal justice system, and providing additional funding to the tune of £400 million until the end of the 2025 financial year.

Tranche 2 reforms (Australia)

Australia is expected to introduce Tranche 2 reforms in 2024/2025 to avoid getting added to the FATF grey list. The Attorney General announced a consultation on AML/CFT reforms and indicated that the government had accepted recommendations included in the Senate’s Inquiry into the adequacy and efficacy of Australia’s anti-money laundering and counter-terrorism financing regime.

Tranche 2 reforms have long been a point of contention in Australia. The Senate report included an overview of the regulation of Tranche 2 entities, current and emerging challenges in AML, and various recommendations for improvement. Tranche 2 entities include lawyers, real estate agents, casinos, other gambling service providers, auditors, and precious metal and stone dealers.

Recommendations include introducing gatekeeper regulation and improving the AML/CFT framework. It also advises simplifying AML/CFT rules, supporting the use of technologies to meet know your customer (KYC) obligations, applying a risk-based approach to regulation, pursuing a beneficial ownership register, increasing penalties for money laundering and terrorist financing, and boosting resourcing in AUSTRAC. The Australian government committed AUS$14.3 million over four years to support necessary legislative and regulatory reforms. 

AI regulations (G7)

In October 2023, the G7 issued a Statement on the Hiroshima AI Process, announcing the Hiroshima Process International Guiding Principles for Organizations Developing Advanced AI Systems and the Hiroshima Process International Code of Conduct for Organizations Developing Advanced AI Systems to address identified priorities. In November, the United Kingdom brought together government and technology leaders with twenty-eight governments, including the UK, US, EU, Australia, and China, aggregating to the Bletchley Declaration on AI safety. The declaration highlights the need for international cooperation to address risks associated with AI to harness the “transformative positive potential of AI” while ensuring the development of human-centric, trustworthy, and responsible AI. Companies also agreed to test new models with governments before they are released to manage risks. 

Crucially for AML/CFT professionals, regulators, and policymakers are beginning to sketch out how AI could be regulated nationally. Legislative proposals are at various stages of development across – amongst others – the EU, US, Canada, and UK, with more codified requirements likely to be published through 2024. 

The State of Financial Crime 2024

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