Six Need-to-Know Facts about the AML Act of 2020
The new year rings in the most significant changes in U.S. anti-money laundering (AML) law since the enactment of the USA PATRIOT Act and its implementing regulations in 2001. On January 1, 2021, the Anti-Money Laundering Act of 2020 (the “Act”), became law as part of the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”). The AML Act will have a substantial impact on financial institutions with AML program requirements as well as certain legal entities such as limited liability companies established within the United States.
The AML Act is designed to sharpen the tools available to the U.S. government in curbing money laundering, terrorist financing, and other financial crimes. In the coming months, financial institutions and U.S. companies should pay close attention to the implementation of the new AML laws by the Secretary of the Treasury along with the Financial Crimes Enforcement Network (FinCEN).
While there are a slew of changes for companies to consider, the AML Act notably touches on:
Information Sharing: The 2021 NDAA aims to enhance information sharing, and the AML Act would create the FinCEN Exchange, a voluntary public-private information sharing partnership designed to expand communications between the federal government and financial institutions. The AML Act further directs the formation of a pilot program on sharing of information related to SARs with foreign branches, subsidiaries, and affiliates of a financial group.
New, Emerging Technology: The AML Act directs a study of the implementation of new technologies to modernize AML laws, including artificial intelligence, blockchain and other emerging technologies. It also directs the hiring of a FinCEN Bank Secrecy Act Innovation Officer, tasked with providing outreach to law enforcement and financial intuitions on technological innovations, and implementation of new methods and technologies for Bank Secrecy Act compliance.
The AML Act also identifies both the virtual currency and art markets as Congressional priorities, directing FinCEN to study and expand efforts to counter money laundering issues through the sale of antiquities and works of art, and through the use of virtual currencies.
Reporting Obligations: The AML Act authorizes the Secretary of the Treasury to undertake a formal review of financial institution reporting requirements related to currency transaction reports and suspicious activity reports (SARs), and to reduce any unnecessarily burdensome requirements, as well as to determine whether existing dollar thresholds for reporting should be adjusted.
More Support for FinCEN: The AML Act provides for expanded FinCEN staffing, including domestic and international liaisons responsible for increasing coordination with federal regulators, financial institutions, foreign law enforcement agencies, and foreign governments, as part of the overarching plan to increase information exchanges and communication between AML authorities, foreign jurisdictions and financial institutions.
Whistleblower Program: The Act amends and expands whistleblower awards and protections. Under the prior version, whistleblowers were eligible for a reward if they provided information that led to a recovery exceeding $50,000. Awards were capped at $150,000. The new provisions authorize Treasury to grant a whistleblower award only where an enforcement action under the BSA results in penalties, disgorgement, and interest exceeding $1,000,000. A whistleblower award may be in an amount of up to 30% of ordered penalties, disgorgement, and interest.
New and Increased Penalties: Congress created two new criminal offenses in the Act. Both offenses are punishable by a fine of up to $1,000,000, 10 years’ imprisonment, or both. The Act creates a number of new penalties for already existing Bank Secrecy Act (“BSA”) violations. For repeat violators, Treasury may impose, in addition to any other applicable penalties, a penalty of up to three times the profit gained from the violation, or twice the maximum penalty with respect to the violation. The new penalty applies only to persons who commit both a first and subsequent violation after January 1, 2021.
Financial institutions should carefully review these and the other provisions in the AML Act to ensure that they are adequately prepared for the changes. The AML Act will affect many aspects of how financial institutions interact with federal and state regulators, enforcement agencies, and other companies, and how they comply with the BSA.
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