The Top Five Major U.S. Money Laundering Reforms for 2021
The 2021 National Defense Authorization Act, passed by the U.S. House and Senate in December 2020, updates many Anti-Money Laundering and Countering Terrorist Financing laws in the United States, including the original Bank Secrecy Act. This is the largest reform of AML/CFT since 2001’s USA PATRIOT Act.
These reforms impact financial services firms of all sizes, but they serve to make the AML/CFT laws in the United States more sensible and give both the public and private sectors better tools to find and prosecute those who destabilize the financial system and commit heinous crimes.
#1: Wider International Impacts
The largest change is undoubtedly the expansion of beneficial ownership reporting. FinCEN is now charged with collecting and retaining the beneficial ownership information for every company in the US that is not public, has fewer than 20 employees, has annual revenue less than $5M, and does not have a physical U.S. address. Banks will coordinate with FinCEN on this information for their customers.
Another major internationally-focused reform is the new capability to subpoena records of foreign banks with correspondent accounts, even records located overseas. Banks will be required to provide information on a physical person located in the U.S. upon whom to serve the subpoenas, and non-compliance with these subpoenas may result in a forced termination of the relationship. This will definitely change the risk assessment applied to some new accounts.
In addition, the Antiquities industry will now be subject to BSA, and there will be a pilot program for international information sharing between banks and their overseas offices in jurisdictions other than China, Russia, and state sponsors of terrorism or subjects of economic sanctions.
#2: Increased Fines, Rewards, and Coverage
“Egregious [AML] violators” will now be banned from serving on the boards of any U.S. financial institution for 10 years, bonuses can be rescinded, and repeat offenders may have their fines doubled.
On the other side, whistleblowers may be awarded up to 30% of the monetary sanctions resulting from their actions, and they have stronger protections against retaliation.
The criminal standard for AML/CFT has also been expanded, with concealment or falsification of the source of assets in certain monetary transactions now criminalized. This coverage includes entities involved in money laundering as well as senior foreign political figures, their families, and their close associates performing transactions over $1M USD.
#3: Innovative Technology Support
The Department of Treasury is charged with supporting technological innovation in combating AML/CFT through a variety of avenues, including the establishment of a 5-year subcommittee on innovative technology and a financial crimes tech symposium; expanded hiring capability; implanted BSA Innovation Officers in FinCEN and each regulator; personnel rotation between the regulators and DoJ, FBI, DHS, DoD, and others; and new testing standards specifically focused on machine learning and information security.
More practically, sharing compliance resources between banks is now explicitly allowed. This is a great leap for innovation, as it allows smaller financial institutions, like community banks and credit unions, to consolidate their resources and invest in technology that will save them money and effort, as well as gain market share from better customer acquisition and onboarding.
#4: Expanded Information Sharing from FinCEN
FinCEN will now be spearheading a number of efforts aimed at radically increasing the information sharing between financial institutions and the government:
the FinCEN Exchange, a public-private partnership between law enforcement, national security agencies, financial institutions and FinCEN
the establishment of 6 domestic and 6 international FinCEN liaisons, tasked with improving communication with both regulators and banks
the commitment of FinCEN to provide feedback on SARs to financial institutions
the preparation of a semi-annual report to share threat patterns and trend information among all financial institutions.
#5: Sharply-Focused Strategies for the Future
It appears that Congress understands how quickly the financial sector is changing. In addition to changing language to better encompass neo-currencies, requirements have been levied for evaluations on a number of subjects often cited as the biggest concerns in the AML/CFT community. These include formal reviews of
SAR and CTR processes and thresholds
FinTechs and their relationship to financial crime
De-risking practices that may over-impact charities or underbanked groups
The inclusion of Art Dealers under the BSA
Congress has also requested studies on beneficial ownership requirements, feedback loops, the utility of CTRs, trafficking, trade-based money laundering, money laundering specifically related to China, and money laundering specifically related to foreign political influence campaigns.
While these five areas of reform will have major impacts, there are nearly 90 pages dedicated to AML/CFT in the 2021 NDAA, with a number of topics and specific actions that were not covered in this short article.
Contact Clovis Technologies today to find out how you can capitalize on these forward-thinking reforms to improve your compliance and fraud functions and expand your market.