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The Anti-Money Laundering Act of 2020 Has Introduced Comprehensive BSA/AML Compliance Reforms

The Anti-Money Laundering Act of 2020 (AMLA) is poised to result in the most comprehensive reforms to BSA/AML Compliance since the USA PATRIOT Act of 2001. Along with significant reforms, the Act clarifies existing BSA and AML rules and obligations that have long-diminished the effectiveness of the Bank Secrecy Act. While certain provisions of the AMLA became effective on January 1, 2021, other provisions become effective at later dates. FinCEN continues to work toward issuing regulations within the proposed timelines. Following is a summary of key components that are expected to formalize as AMLA 2020 takes shape.New Beneficial Ownership

Requirements and the Creation of a Central Registry – The current Beneficial Ownership Rule, which escalated to become the Bank Secrecy Act’s Fifth Pillar, required financial institutions to obtain beneficial ownership information on legal entity customers that open new accounts. The information obtained is not verifiable in many instances, and the rules allow for a long list of excluded entities. These issues created a significant loophole and weakened the usefulness of the data. The Corporate Transparency Act, which is part of the AMLA, will require business entities to report personal identifying information for beneficial owners to FinCEN, who will maintain a non-public national registry. The registry will be available for law enforcement agencies and financial institutions (in a limited use capacity). The intention of the registry is to further discourage the use of shell corporations to disguise money-laundering activities.

Creation of new Office of Domestic Liaison within FinCEN – FinCEN gains staffing with the establishment of a new Office of Domestic Liaison. BSA Officers have always understood and promoted the importance of a relationship with the regulatory agencies and law enforcement in reporting BSA/AML activities. The Act intends for the office to serve as a liaison to promote the coordination and consistency of supervisory guidance from FinCEN and all of the federal and state financial regulators.

Establishment of National AML and Counter-Terrorism Priorities – FInCEN, along with the Department of Justice, federal and state financial regulators, and relevant national security agencies will be required to establish national priorities for AML and CFT (countering financial terrorism). Once the priorities are named, financial institutions will be expected to modify their existing BSA/AML programs and risk assessments to sufficiently address them. The priorities will be used as a measure by which financial institutions will be supervised and examined for BSA/AML compliance. The AML priorities will be expected to be updated periodically to reflect industry changes and emerging risks.

Mandatory Treasury Review of CTR and SAR Requirements – Of particular interest to all BSA/AML professionals, the Act requires a formal modernization of CTR and SAR filing requirements. The objective is to reduce unnecessarily burdensome regulatory requirements and ensure the useful and practicality of regulatory reports. Some of the issues expected to be included are 1) review of existing rules and guidance 2) review of dollar thresholds for reporting and a determination on whether adjustments to thresholds are needed 3) review of the process for filing continuing activity SARs, 4) review of critical fields in regulatory reports, and 5) review of CTR exemption rules to determine if additional exemptions can effectively reduce the filings of reports that have little or no value to law enforcement.

Other proposed changes of significance include:

• Increased BSA/AML penalties for non-compliance
• Modernizing the definition of “financial institution” to include antique dealers and virtual currencies
• The creation of a Subcommittee on Innovation and Technology to encourage and support technical advancements in BSA/AML/CFT.
• Broader federal authority for subpoenas of non-U.S. bank records
• New Safe Harbor provisions that protect a financial institution from liability for keeping an account open at the request of a federal law enforcement agency
• New whistleblower program that expands protections for reporting BSA violations
• A SAR program that will enable the sharing of SAR information with foreign branches, subsidiaries, and affiliates of a regulated financial institution