The Anti-Money Laundering Act of 2020: New tools to combat financial crimes.
Since 1970, the Bank Secrecy Act has provided financial regulators with tools to combat money laundering and, for the last 20 years, terrorism financing. The Anti-Money Laundering Act of 2020—enacted January 1, 2021 with passage of the National Defense Authorization Act—significantly amended the Bank Secrecy Act, providing even more tools to combat financial crime.
Most of the AMLA seeks to empower financial regulators and strengthen enforcement:
- Financial regulators now may share information across agencies to combat financial crime and combine transactions, in certain circumstances, to meet the minimum threshold for prosecuting money laundering transactions.
- The Secret Service is given clear jurisdiction to investigate money laundering and similar “structured transactions.”
- Transactions outside of traditional banking systems—such as hawalas (a system of transferring money through brokers without physically moving money) and transporting blank bearer bonds—are now included in federal anti-money laundering enforcement.
- The ability of the Treasury and Justice Departments to subpoena records of foreign banks is expanded; financial regulators may now subpoena documents related to any account at the foreign bank—not merely a correspondent account in the United States. Foreign banks that do not comply with subpoenas face substantial civil penalties and risk termination of their domestic correspondent relationships.
The AMLA even creates a new inter-agency Subcommittee on Innovation and Technology (to identify and implement technological innovations) and instructs the Treasury Secretary, in consultation with the Attorney General and the Homeland Security Secretary, to review and update regulations as appropriate to respond “to new and emerging threats” and establish law enforcement priorities based on their risk assessment.
Other provisions of the AMLA focus on private entities – one of the most significant being the Corporate Transparency Act of 2019, which creates a centralized register of ultimate beneficial ownership information.
With few exceptions, the CTA applies to every corporation, limited liability company, or similar entity (including foreign entities doing business in the United States). Generally speaking, the following entities are excluded:
- Entities already regulated under federal or state oversight of the financial or insurance markets, utility providers, and non-profit entities.
- Private companies with more than 20 full-time employees and a physical office, both within the U.S., that reported more than $5 million in gross revenue on their previous year’s federal income tax returns.
- Non-operating entities which have been in existence at least one year, hold no assets, are not owned by foreign persons, and have not sent or received more than $1,000 in the preceding 12 months (including accounts held by all affiliates).
Each entity subject to the CTA’s reporting requirements will be required to submit a report to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) providing the full name, birthdate, residential or business street address, and unique identifying number (e.g. social security number) or identifier provided by FinCEN for each “beneficial owner” of the reporting company. A beneficial owner is an individual who (directly or indirectly) exercises “substantial control over the entity” or owns or controls 25% or more of the ownership interests of the entity.
The CTA’s reporting requirement becomes effective once the Treasury Secretary issues final regulations, which must occur no later than January 1, 2022. Reporting companies formed before the effective date of the Secretary’s regulations will have a “grandfather” period of 2 years after the regulations’ effective date to submit their report to FinCEN. Those formed after the regulations’ effect date must submit their report to FinCEN at the time of formation or registration. Changes in UBO information must be reported to FinCEN within one year after the change. The CTA imposes criminal penalties—a fine up to $10,000 and imprisonment up to 2 years—as well as civil penalties of $500 per day the violation continues, on persons willfully providing false information to FinCEN.
The UBO information will not be public; it will be kept confidential and shared only with federal agencies engaged in national security, intelligence or law enforcement, state law enforcement agents authorized by a court, or foreign law enforcement agencies under a treaty or similar convention within “trusted foreign countries.” In each case, disclosure is subject to an application showing that the need and use of the information is permitted by law. Additionally, with the reporting company’s consent, UBO information may be shared with financial institutions to help with their federal, customer due diligence requirements. And the CTA is serious about preventing misuse of UBO information: a person who knowingly misuses UBO information is liable for civil penalties of $500 per day the violation continues, a fine up to $250,000, and imprisonment up to 5 years; if the misuse occurs while violating another U.S. law (or as a pattern of illegal activity involving more than $100,000 in a 12-month period), the potential fine increases to $500,000, and the potential imprisonment increases to 10 years.
Enhancing Whistleblower Compensation
Other provisions focus on private citizens. Notably, the BSA’s whistleblower program has been substantially rewritten and strengthened. Modeled after the SEC whistleblower program enhancements under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the new provisions increase the amount of the award whistleblowers may receive for providing their employers or regulators with information regarding violations of the BSA: previously, up to 25% of the monetary sanctions collected with a maximum award of $150,000; a whistleblower may now be awarded up to 30% of the monetary sanctions collected with no maximum award (however, the monetary sanctions must exceed $1,000,000).
Whistleblowers providing information under the enhanced system are protected by significant anti-retaliation provisions enforceable by the Labor Department or a private right of action. Relief for injured whistleblowers includes reinstatement (with the same level of seniority), two times the amount of backpay the whistleblower would have otherwise earned plus interest, compensatory damages (which include litigation costs, expert witness fees, and attorney’s fees) and “any other appropriate remedy.”
As the Treasury Secretary implements updated and new regulations under the CTA and the enhanced whistleblower program, financial institutions likewise will need to review and update their internal policies to comply with the new requirements under the Bank Secrecy Act.