In December 2020, as part of the National Defense Authorization Act for Fiscal Year 2021, Congress passed the Anti-Money Laundering Act of 2020 (AMLA). The AMLA builds on and updates the Bank Secrecy Act of 1970 (BSA) and the USA PATRIOT Act of 2001 to modernize anti-money laundering and countering the terrorism financing laws to adapt the government and private sector response to new and emerging threats.
Beneficial Ownership Information Reporting Requirements
To address the use of shell companies in money laundering operations, Title LXIV of the AMLA (referred to as the “Corporate Transparency Act”) will require corporations, limited liability companies, and other foreign entities registered to do business in the U.S. to disclose their beneficial owners to the U.S. Department of Treasury’s (Treasury) Financial Crimes Enforcement Network (FinCEN). The Corporate Transparency Act defines beneficial ownership as an entity or individual who, directly or indirectly, (1) exercises substantial control over the company or (2) owns or controls 25 percent or more of the entity’s ownership interests.
Reporting companies must provide the following information for each beneficial owner:
- Full legal name
- Date of birth
- Current residential or business address
- The unique identifying number of an acceptable identification document, e.g., passport, driver’s license
FinCEN will leverage this information to create and maintain a national registry of beneficial ownership information. The registry will not be made public, but federal, state, and tribal law enforcement agencies may obtain the information pursuant to a court order. In addition, financial institutions will be able to access information from the beneficial ownership database with their customers’ permission.
Entities that are already subject to disclosure requirements under the BSA or deemed to not represent significant money laundering risks are exempt from these new reporting requirements. This exemption list includes publicly traded companies registered with the SEC, public accounting firms, FDIC-insured financial institutions, public utilities, trusts, political organizations, insurance companies, and 501(c) organizations. Companies with more than 20 full-time employees, more than $5 million in gross receipts or sales, and a physical office in the U.S. also are exempt.
FinCEN is required to issue regulations under the Corporate Transparency Act within a year. The effective date for the reporting requirements for existing entities is two years after the effective date of these regulations. However, any reporting company that has been formed or registered after the effective date of the regulations must submit the required information at the time of formation or registration.
Enhanced Whistleblower Incentives
The AMLA also expands the whistleblower award program under the BSA to mirror the SEC’s current whistleblower incentives. Until now, the BSA whistleblower program capped awards at $150,000, but the new program authorizes an award of up to 30 percent of what is collected in a successful AMLA enforcement action brought by the U.S. Department of Justice (DOJ) or Treasury that results in monetary sanctions of more than $1 million. The information provided by the whistleblower must be original and voluntarily reported to his or her employer, Treasury, or the DOJ.
Increased Penalties for BSA Violations
The AMLA also increases penalties for anti-money laundering law violations, including:
- Additional civil monetary penalties for certain repeat violators of anti-money laundering laws, including three times the profit gained or loss avoided as a result of the violation or two times the maximum penalty for the violation.
- Partners, directors, officers, or employees of financial institutions convicted of violating the BSA must repay their bonuses during the calendar year during which or after the violation occurred.
- Anyone found to have committed an egregious violation of the BSA is barred from serving on the board of directors of a U.S. financial institution for 10 years from the date of conviction or judgment.
- Penalties of up to 10 years’ imprisonment and/or a $1 million fine may be imposed for knowingly concealing or misrepresenting a material fact from or to a financial institution concerning (1) the ownership or control of assets in transactions exceeding $1 million involving assets of a senior foreign political figure, close family member, or other close associate or (2) the source of funds in a transaction involving an entity that is a primary money laundering concern.
In addition, the DOJ will be required to submit an annual report to Congress disclosing all deferred prosecution agreements and nonprosecution agreements the DOJ enters during the prior year with respect to any violations or suspected violations of the BSA.
Other Notable Updates
- The AMLA also subjects those who exchange or transmit value that substitutes for currency, e.g., virtual currency, to BSA registration and compliance requirements. This means that cryptocurrency-to-cryptocurrency transactions are now under the scope of the above AMLA reporting requirements. Further guidance will be provided in the regulations.
- Treasury and the DOJ have expanded authority to issue subpoenas to any foreign bank that maintains a correspondent account in the United States. This authority is relatively broad, as it allows the agency to request any records relating to the correspondent account or any account at the foreign bank, including records maintained outside the United States.
- The AMLA also seeks to encourage technological innovation and for financial institutions to use new technology to combat new threats related to money laundering and terrorism financing.
- The FinCEN Exchange program, launched in 2017, is formalized in the AMLA to further enhance and improve information sharing between government agencies and financial institutions.
The AMLA brings much-needed updates to U.S. anti-money laundering laws, bringing the U.S. more in line with international standards and giving federal agencies more resources and authority to combat money laundering and the financing of terrorism. Although more guidance is expected within the next year, as we await these regulations, entities subject to the new beneficial owner reporting requirements and financial institutions should review these new provisions to prepare for upcoming changes that may require additional compliance responsibilities, restructuring of polices, and updated internal controls.
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