The US Anti-Money Laundering Act

The Anti-Money Laundering Act of 2020 (AMLA) forms part of the National Defense Authorization Act (NDAA) and has greatly widened the scope of enforcement and reporting requirements. Some have called it the biggest overhaul of the bank’s secrecy and AML regime since the Patriot Act. Under AMLA, provisions include:

• The establishment of a beneficial ownership database
• The expansion of AML into the trade of antiquities and art 
• The expansion of law enforcement subpoena powers
• The use of new technologies 
  

Under AMLA 2020, it is clear that the US government is taking a firm stance to combat financial crime. While the original law focused largely on filing suspicious activity reports, AMLA has emphasized the need to identify and manage risk and codified many practices for information-sharing across the Financial Crimes Enforcement Network (FinCEN) and financial institutions. Information-sharing between the public and private sectors is another key focus that will strengthen the AML system and expand FinCEN's role. 

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Understanding the Key Provisions

AMLA provisions consist of nearly 1500 pages of updates to AML and BSA law requirements, and many of these requirements call for further analyses and studies. However, their renewed approach to financial crime and priorities is clear. 

Beneficial Ownership Reporting 

FinCEN is required to maintain beneficial ownership information in a secure, non-public national registry. There was no US requirement for companies to provide information regarding beneficial ownership to a federal database before AMLA. This provision will address the “loophole” whereby criminals conduct business and transfer money through 

non-transparent ownership structures. This may represent the most critical component of BSA reform as enforcement agencies will be able to access this information with a court order, while financial institutions may access data from FinCEN with the permission of their customers. This will effectively give banks access to independent documentation to corroborate ultimate beneficial ownership information. 

The Expansion of AML to Art and Antiquities 

The reformed BSA will now cover antiquities and art dealers. The art market has long been an effective and underregulated channel for money laundering. While the sector lacks a functional federal regulator responsible for vetting antiquities and art dealers, banks may need to accept the responsibility when onboarding these customers. Expectations will likely be clarified in the future. 

Expanded Subpoena Powers 

AMLA 2020 has also established a broader set of authorities in order to combat globalized financial crime. Law enforcement will now have the ability to subpoena international financial institutions holding correspondent accounts in the US, whether or not the information being sought relates to a correspondent account. This will allow law enforcement to combat an increasingly complex set of threats caused by continent-spanning markets and operating environments. 

Automation Technology As The Future of AML Compliance

AMLA has also placed a renewed emphasis on the use of new technologies and data in order to identify financial crimes and calls for regulators to be properly trained in what to look for in AML threat monitoring programs. While the cost of upgrades and new technologies may have discouraged financial institutions from pursuing new tools, tech can accelerate reforms and improve firms’ ability to respond to rapidly-changing regulations and sanctions. Automation technology that can aggregate and synthesize data and eliminate false positives will enable investigators to spot patterns and enhance their AML efforts. 

Expanded Whistleblower Rewards

The Department of Treasury had the discretion to distribute awards to whistleblowers but no obligation to award payments and payments were capped at $150,000. AMLA now eliminates the discretion and mandates payments, increasing the potential amount of awards and providing additional protection to money laundering whistleblowers modeled after the Dodd-Frank Wall Street Reform and Consumer Protection Act’s provisions. Certain classes of individuals (including regulatory officials or participants in wrongdoing) are still prohibited from receiving awards. The $150,000 cap has been replaced with a payment ceiling of 30% of the government's collection if the monetary sanctions imposed exceed $1 million. 

Expanded Oversight Into Virtual Currencies

In addition to its renewed focus on the art and antiquities market, AMLA provisions seek to regulate businesses that conduct a non-traditional exchange of value, such as cryptocurrency. 

Compliance Programs and Reporting

AMLA requires that the Treasury Department enhances anti-money laundering and counter-terrorist financing priorities and that financial institutions incorporate the identified priorities into their AML compliance programs. Regulators are encouraged to examine the compliance of these AML programs in line with the stated national priorities. 

Additional Provisions 

In addition to the above requirements, AMLA requires: 

• The Department of Justice to submit an annual report containing information on the application of data from financial institutions filing SARs to assess the usefulness of such reporting to law enforcement; 
• FinCEN to establish automated and improved processes for filing simple suspicious activity reports; 
• Treasury to conduct a study into whether or not the current thresholds for SAR filing are appropriate or in need of adjustment; 
• Treasury to issue rules regarding the standards for testing AML compliance-based technology.
  

Conclusion

Financial institutions are likely to only feel the full impact of AMLA once it's implemented and enforced in practice. Several studies and reviews have yet to be completed as mandated in the regulation. However, AMLA is a clear indication that the government is committed to combating financial crime and willing to take whatever steps necessary to clamp down on money laundering and terrorist financing. If anything, regulations will become even more stringent. Firms should empower themselves with robust technological tools and expert consultants in order to prepare for the next wave of controls and regulations.