The US Congress passed the Anti-Money Laundering Act 2020 and could be one of the most impactful changes to AML for two decades.
This new regulation is aimed at bolstering and modernising the US’ AML and CFT infrastructure to meet the changing ecosystem and technology. Changes in the regulation have been welcomed by many industry participants. John Gentile, director of broker-dealer compliance services at CSS, said, “The recent passage of the Anti-Money Laundering Act of 2020 (“Act”) represents the most significant anti-money laundering legislation since the USA Patriot Act of 2001.”
One of the major developments the new act will bring in is a new beneficial ownership database, which will be implemented by FINCEN. The database hopes to prevent people abusing shell companies for money laundering or terrorism financing. It is aimed at small companies and will require them to disclose information about their beneficial owners, including addresses and identification numbers.
Gentile added, “From an AML perspective, this database is one of the more consequential aspects of the Act, and will be used by law enforcement and, under certain circumstances, financial institutions, as an AML tool to provide greater transparency into the beneficial owners of these companies.”
Fines for failing to meet compliance are up to $500 per day and $10,000 in criminal fines. Individuals found to have failed to complete submissions or provide false information could face prison.
Another key part of the regulation are new protections and rewards for whistleblowers. This could see them earn up to 30% of the money recovered by the Treasury in compliance fines that are greater than $1m.
The regulation also bolsters the US government’s ability to gain information from international financial institutions with the ability to send subpoenas to foreign banks, and also encourages firms to adopt emerging technology to improve their compliance efforts. There are a number of other changes detailed in the regulation.
However, not everyone has been accepting of the regulation, believing it does not do enough. The ICIJ recently outlined seven shortcomings of the regulation. This included “loopholes pushed for by special interest groups.”
The report states that certain Wall Street investment firms will not have to report, trusts could be missed by the regulation and access to the ownership database is limited for state and local law enforcers.
In a blog post, Sigma Ratings director of financial crime intelligence Hamad Alhelal said, “While there might be mixed reactions to the significance of the legislation, the centuries-old proverb, “Rome wasn’t built in a day,” certainly provides the needed perspective to appreciate its historical importance.
“Aside from the PATRIOT Act, which was enacted in 45 days as a direct response to the September 11 attacks, legislative action to combat financial crime has never commanded the urgency seen in the 21st century. As the 2020 AMLA and PATRIOT Act rank as the most significant of the 9 major AML laws following the nation’s first and pre-eminent legislation, the Bank Secrecy Act of 1970, it’s essential to highlight that it took nearly two decades until the Money Laundering Control Act of 1986 established money laundering as a federal crime.”
The regulation could have other impacts on financial institutions. A blog from Quantifind stated the regulation will increase the importance for financial institutions to clear their alert backlogs.
It states that financial institutions are laden with a backlog of AML alerts. AMLA states prioritisation of resources should be put on high-risk customers and encourages the implementation of technology to support compliance. By implementing automation technology, firms can accelerate their handling of alerts and put more resources on the high-risk customers and major alerts that come through.
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