AMLA(2020): A SUMMARY BY CROSSBAR FINANCIAL CRIME ACADEMY

Anti-Money Laundering Act of 2020 (AMLA), certainly brings in the first major reforms of the 50-year-old United States anti-money laundering (AML) framework since the 2001 USA PATRIOT Act was enacted after 9/11. The result is that the US is moving from a US-focused, regulator-versus-regulated,compliance-focused regime to a global, public/private partnership focused on fighting all financial crimes.

1. It broadens the mission or purpose of the Bank Secrecy Act (“BSA”) to include national security;
2.  Formalises the risk-based approach for financial institutions’ compliance programs;
3. Significantly expands the duties, powers, and functions of FinCEN;
4. Aligns the regulatory agencies’ supervision and examination priorities with the expanded purposes of the BSA;
5.  Increases civil and criminal penalties for violations of the BSA;
6.  Calls for multiple studies and reports; and establishes a beneficial ownership information reporting regime.

The AML Act of 2020, Division F of the NDAA, is at pages 2,843 – 3,078 (235 pages long). It is made up of 56 sections in five titles.10 Sections 6001-6003 set out the title of the Act, its purposes, and definitions of key terms. Following those three introductory sections are the five titles:

• Title LXI – Strengthening Treasury Financial Intelligence, Anti-Money Laundering, and Countering the Financing of Terrorism Programs (sections 6101-6112)
• Title LXII – Modernizing the Anti-Money Laundering and Countering the Financing of Terrorism System (sections 6201-6216)
• Title LXIII – Improving Anti-Money Laundering and Countering the Financing of Terrorism Communication, Oversight, and Processes (sections 6301-6314)
•  Title LXIV – Establishing Beneficial Ownership Information Reporting Requirements (sections 6401-6403)
• Title LXV – Miscellaneous (sections 6501-6511)

Changes to the Purpose of the Bank Secrecy Act

• The additions to the “purpose” section of the BSA may be the single biggest change to the current AML/CFT regime (Section 5311 of title 31 is the declaration of purpose)
• From 1970 through 2001, that purpose was simply “to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations, or proceedings.”
• The USA PATRIOT Act of 2001 added a clause relating to international terrorism: the amended section provided that the purpose was “to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations, or proceedings, or intelligence or counterintelligence activities, including analysis, to protect against international terrorism.”
• The original (post-2001) purpose has been changed in three ways:
  •  First, changing reports “where they have a high degree of usefulness” to reports “that are highly useful”.
  •  Second, those reports are now to be used in regulatory risk assessments.
  •  And third, it appears that BSA reports are intended for all terrorism purposes, not just international terrorism (domestic and international). The new section 5311 declaration adds four new purposes: strong private sector programs, tracking dirty money, conduct national risk assessments to protect the financial system and national security generally, and to encourage public private sector information sharing.

Changes to FinCEN’s Duties, Powers and Scope

The duties and powers of the FinCEN director set out in section 310(b) have been greatly expanded:

(A) Provide advice and make recommendations to the Under Secretary for Enforcement

(B) Maintain a government-wide database of BSA reports

(C) Analyze and disseminate intel from that database

 (D) Maintain a communications center for law enforcement

 (E) Furnish research, analytical, and informational services to the private and public sectors

 (F) Assist law enforcement and regulators in combatting informal value transfer systems

 (G) Support the tracking of foreign assets

(H) Coordinate with foreign FIUs

 (I) Administer the requirements of the BSA

(J) Promulgate regulations to implement the exam and supervision priorities of BSA/AML programs (K) Communicate regularly with the private sector, regulators, and law enforcement to explain the Government’s AML/CFT exam and supervision priorities

(L) Give and receive feedback to and from the private sector and State bank and credit union supervisors

(M) Maintain money laundering and terrorist financing experts to support federal civil and criminal investigations

(N) Maintain emerging technology experts

(O) Such other duties and powers as the Secretary may delegate

Perhaps the biggest impact of the AML Act of 2020 will be felt at FinCEN. With the expanded duties and powers, and the beneficial ownership information database obligations

Confidentiality

FinCEN will maintain BOI as strictly confidential, and may disclose such information only in four narrow circumstances.

Uniform Beneficial Ownership Reporting Requirements

The AMLA establishes uniform beneficial ownership reporting requirements for certain companies (Reporting Companies) and creates a secure, nonpublic database at FinCEN for BOI.

Goals

1. Intended to improve transparency regarding the illicit flow of funds through corporate structures
2. Discourage the use of shell corporations to move illicit funds
3. Assist national security, intelligence, and law enforcement agencies in combating crime.

Reason

Annually, over 2 million companies are formed in the United States, but most states do not request BOI upon formation. This anonymity allows bad actors to conceal their ownership interests in American companies that may facilitate serious illicit activities, including money laundering, terror financing, human and drug trafficking, and tax fraud, which harms the national security interests of the United States and its allies.

What BOI Must Be Reported?

(i) Full legal name;

 (ii) Date of birth;

(iii) Current residential or business street address; and

(iv) A unique identifying number, such as a Social Security number or a FinCEN identifier, which FinCEN may issue upon request. BOI will be retained by FinCEN for at least five years .

Changes to the Reporting of Suspicious Transactions

Reporting of suspicious transactions, or Suspicious Activity Reports (SARs), is set out in subsection (g) of section 5318. The AML Act changes the SAR regime in a number of ways, including .

• 5318(g)(1) – gives the Secretary the ability to issue regulations to require financial institutions to report suspicious transactions.
• (g)(2) – Notification Prohibited – A filing financial institution and any officer, director, or employee of a filing financial institution cannot notify or disclose to any person involved in a reported suspicious transaction that the transaction has been reported or otherwise reveal any information that would reveal that the transaction has been reported.
• (g)(3) – Liability for disclosure of SAR
• (g)(4) – Single designee for SARs (FinCEN) (g)(5) – Establish streamlined, including automated, processes to, as appropriate, permit the filing of noncomplex categories of SARs. Subsection
• (g)(5)(C) provides that “reports filed under this subsection shall be guided by the compliance program of a covered financial institution with respect to the BSA, including the risk assessment processes of the covered institution that should include a consideration of priorities established by the Secretary of the Treasury under section 5318.”
• (g)(6) – FinCEN shall share threat pattern and trend information at least semiannually to provide meaningful information about the preparation, use, and value of BSA reports. It shall include typologies, including data that can be adapted in algorithms, if appropriate on emerging money laundering and terrorist financing threat patterns and trends
• (g)(7) – Rules of construction (added by s. 6206)
• (g)(8) – Pilot program within one year to allow a US financial institution to share SAR-related information with its foreign branches and affiliates.

Subpoena Power

Grant the Secretary and Attorney General the power to issue a subpoena to any foreign bank that maintains a correspondent bank account in the United States, requesting any records relating to the correspondent account or any account at the foreign bank, including records maintained outside of the United States that are the subject of a civil forfeiture action, or an investigation. When served with a subpoena, the foreign bank shall produce all requested records but also may petition to modify or quash the subpoena. Upon a written request from a law enforcement officer, a U.S. financial institution that maintains the U.S. correspondent account for the foreign bank must provide this information within seven days.

Consequences for resisting or disclosing subpoena

1. A civil penalty of up to $50,000 for each day the foreign bank fails to comply. Following 60 days of noncompliance, the Secretary or Attorney General may seek additional penalties and compel compliance in the appropriate U.S. district court.
2. The U.S. financial institution that maintains the correspondent banking relationship with the foreign bank may be ordered by the Secretary or Attorney General to terminate such correspondent relationship
3. Any funds held in the correspondent account of a foreign bank that is maintained with the U.S. financial institution may be seized to satisfy penalties

CONCLUSION

The AMLA’s changes affect government and industry players. FinCEN is instructed to simplify and streamline compliance obligations.Financial institutions can better allot AML/CFT resources with more focused guidance from FinCEN. While some uncertainty remains for financial institutions, particularly with regard to how CDD Rule changes will affect their BOI obligations, forthcoming regulations should resolve those open questions. The overarching impact of the AMLA should be to prevent the abuse of the United States financial system by bad actors while balancing the interests of those subject to compliance obligations.

Reference & Credit:

1. AMLA2020: RENEWING AMERICA’S AML/CFT REGIME : JAMES RICHARDS WWW.REGTECHCONSULTING.NET
2. https://www.mofo.com/resources/insights/210112-anti-money-laundering-act.html
3. Images-https://unsplash.com/s/photos/
4. https://complyadvantage.com/knowledgebase/us-anti-money-laundering-act-amla-2020/

About the Summary writer

Viswa Teja Bapireddy is an intern with Crossbar Financial Crime Academy. A young, enthusiastic student of Birla Institute of Technology & Science, Pilani, Viswa Teja is specially passionate about the Financial Crime Compliance Domain and likes reading, researching writing and sharing blogs / stories in this domain.