On 1st January 2021, the US Senate passed the Anti-Money Laundering Act 2020 (AMLA). Part of the National Defense Authorization Act for Fiscal Year 2021, the Anti-Money Laundering Act introduces the most significant reforms to anti-money laundering laws and regulations since the US Patriot Act in 2001. The US’ AML Act 2020 was designed to strengthen and modernize AML/CFT infrastructure to reflect the capabilities of emerging technologies and new criminal methodologies.
AMLA 2020 measures range from new protections for corporate whistleblowers, to beneficial ownership rules for shell companies. In order to maintain compliance and address ongoing criminal threats, banks, financial institutions, and other obligated entities must understand their responsibilities under AMLA 2020 – and the Act’s key regulatory highlights.
One of the most significant aspects of AMLA 2020 is the introduction of beneficial ownership requirements for many firms registered to do business in the United States. The beneficial ownership regulations are intended to prevent the misuse of shell companies as a way for money launderers to access the legitimate financial system anonymously.
The Act specifically applies to smaller firms (those with up to 20 employees) because larger entities are already subject to BSA rules that require the disclosure of beneficial ownership. Under the new requirements, firms must submit information about their owners to the Financial Crimes Enforcement Network (FINCEN), including:
- Dates of birth
- Residential and business addresses
- Unique official identification numbers such as a passport or FINCEN identifier
Firms that do not comply with the beneficial ownership rules may be subject to fines of up to $500 per day and criminal fines of up to $10,000. Individuals found responsible for violations such as submitting incomplete, false, or fraudulent beneficial ownership information, may face up to two years in prison.
As part of the beneficial ownership measures, the Act authorizes FINCEN to create a non-public national database of beneficial owners. While the information in the database is not publicly available, FINCEN will be able to make it available to US authorities (and international authorities) conducting AML/CFT and other criminal investigations.
AMLA 2020 reflects the US government’s focus on punishing noncompliance with the BSA and other anti-money laundering rules. Accordingly, AMLA sets out new provisions to punish AML violations, with penalties of 10 years in prison and a $1 million fine for:
- Concealing information or material facts from financial institutions in transactions over $1 million that include politically exposed persons (PEP) or their relatives and close associates.
- Concealing information or material facts from financial institutions in transactions that involve entities that are involved in money laundering.
AMLA introduces penalties for persons that are convicted of BSA violations – applied in addition to the existing fines that may be imposed for the same crimes:
- Persons that are convicted of a BSA violation may be subject to a fine equal to the profit they gained from their violation.
- Employees of financial institutions that are convicted of BSA violations may be required to pay back any bonuses that they received from their employer in the calendar year after which their violation took place.
- Individuals that commit “egregious” BSA violations are prohibited from sitting on the boards of any other financial institutions registered in the US for a period of 10 years.
- Repeat violators of the BSA may, at the discretion of the Treasury Secretary, be subject to increased penalties. Those increased penalties may be up to three times the profit they gained (or loss they avoided), or two times the statutory fine.
Section 6314 of AMLA 2020 introduces a program designed to protect and reward whistleblowers who expose violations of the Bank Secrecy Act (BSA). The program involves the following measures:
- Whistleblowers that provide ‘original information’ on BSA violations may receive a reward of up to 30% of the money recovered by the Treasury in compliance fines that exceed $1 million. Previously, whistleblower rewards were capped at the lower of either $150,000 or 25% of the fine imposed.
- The US Treasury and Justice Departments must take steps to protect the confidentiality of the information provided by whistleblowers and protect the anonymity of the whistleblowers themselves.
- Whistleblowers that disclose potential BSA violations by providing information or testifying against their employers must be protected from retaliation. AMLA 2020 prohibits a range of retaliatory actions, by employers, against whistle-blowing employees including suspension, blacklisting, threats or harassment, or “any other manner” of discriminatory behavior such as non-tangible actions that might isolate employees from their colleagues.
The Act includes several measures to help combat international money laundering, including expanded powers to investigate foreign banks that may be involved in money laundering. Under the Act, the US Treasury may not only issue subpoenas to foreign banks for records of correspondent accounts in the United States but may request records of any account that the foreign bank holds.
AMLA 2020 also introduces a pilot program to increase the sharing of information between financial institutions’ foreign branches, subsidiaries, and affiliates. The program will come into effect within a year and will set out a new framework of international information sharing rules. The new rules exclude information sharing with entities located in China and Russia, although the Treasury can waive those exceptions on a case by case basis. Jurisdictions that are state sponsors of terrorism are also excluded from the rules.
The information sharing program is considered a pilot scheme and will be trialed for three years with the option for an extension of two more years if it is proven to be effective.
AMLA 2020 is intended to strengthen the US financial system against emerging money laundering methodologies, especially those that exploit new technologies and payment methods. With that in mind, the Act includes provisions to bring cryptocurrencies (“value that substitutes for currency”) and cryptocurrency service providers under the scope of BSA AML regulation.
Similarly, the Act highlights the AML risk posed by the art trade and brings art dealers, advisors, and consultants under the scope of the BSA. Further to that step, AMLA requires the US government to conduct a study of money laundering and terrorism financing threats to the art industry in order to determine if further regulations are necessary.
AMLA also expands the resources dedicated to the enforcement of AML laws, creating new offices within the US government and appointing new personnel to staff them, including:
- A new Treasury Financial Attaché Program
- A FINCEN Office of Domestic Liaison
- Six liaison appointments to the Foreign Financial Intelligence Unit
- A BSA Advisory Group subcommittee on Information Security and Confidentiality
- The appointment of a BSA Information Security Officer to FINCEN, the IRS, and every US federal regulator