The first instalment in Jim Richards’ Renewing the BSA Series.
The landscape of the Bank Secrecy Act (BSA) is changing.
The latter half of 2020 saw repeated calls to examine and modernize Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) laws in the United States, from the United States Government Accountability Office (GAO) Report addressing the costs and usefulness of BSA reports, to the Financial Crimes Enforcement Network (FinCEN) Advanced Notice of Proposed Rulemaking (ANPRM) seeking comments on regulatory amendments “to modernize the regulatory regime to address the evolving threats of illicit finance, and provide financial institutions with greater flexibility in the allocation of resources, resulting in the enhanced effectiveness and efficiency of anti-money laundering programs.”
Many of the reforms included in the GAO Report and FinCEN ANPRM were discussed in the December 3, 2020 Senate and House Conference Report on the Anti-Money Laundering Act of 2020 (AMLA), part of the National Defense Authorization Act (NDAA). When the NDAA , became law on January 1, 2021, the AMLA also became law: the repeated calls to examine and modernize AML and CFT laws were heard.
The Purpose of the AMLA
The AMLA may usher in the most profound changes to the BSA/AML regime since the USA PATRIOT Act of 2001.
The Act broadens the mission or purpose of the BSA to include national security; formalizes the risk-based approach for financial institutions’ compliance programs; aligns the regulatory agencies’ supervision and examination priorities with the expanded purposes of the BSA and; increases civil and criminal penalties for violations of the BSA. The Act aims to modernize the AML/CFT laws of the United States and pivot the country from a U.S.-focused regulation and compliance regime to a global, public-private partnership focused on fighting all financial crimes.
Section 6002 of the AMLA describes the purposes of the Act. The full text of this section is set out below:
- to improve coordination and information sharing among the agencies tasked with administering anti-money laundering and countering the financing of terrorism requirements, the agencies that examine financial institutions for compliance with those requirements, Federal law enforcement agencies, national security agencies, the intelligence community, and financial institutions;
- to modernize anti-money laundering and countering the financing of terrorism laws to adapt the government and private sector response to new and emerging threats;
- to encourage technological innovation and the adoption of new technology by financial institutions to more effectively counter money laundering and the financing of terrorism;
- to reinforce that the anti-money laundering and countering the financing of terrorism policies, procedures, and controls of financial institutions shall be risk-based;
- to establish uniform beneficial ownership information reporting requirements to (A) improve transparency for national security, intelligence, and law enforcement agencies and financial institutions concerning corporate structures and insight into the flow of illicit funds through those structures; (B) discourage the use of shell corporations as a tool to disguise and move illicit funds; (C) assist national security, intelligence, and law enforcement agencies with the pursuit of crimes; and (D) protect the national security of the United States; and
- to establish a secure, nonpublic database at FinCEN for beneficial ownership information.
Other significant legislative changes include the expansion of FinCEN’s duties and powers, expanded whistleblower awards and protections, and the passing of the Corporate Transparency Act. The AMLA also introduces Freedom of Information Act (FOIA) protection for information shared with international Financial Intelligence Units (FIUs).
As I will discuss in my next blog, Section 6203 of the AMLA offers a feedback mechanism to indicate the usefulness of Suspicious Activity Reports (SARs) to financial institutions.
A New Era of AML/CFT
While the AMLA signals a new era in the evolution of the BSA/AML regime, the long-term impacts to financial institutions may take many years to unfold. As with the USA PATRIOT Act, the AMLA has already unveiled preliminary multi-year timelines for a variety of congressional studies and reports, regulation development, revisions to the FFIEC BSA/AML Examination Manual and regulator training. As the rules and obligations are established under the Act, financial institutions across the country will enter into a renewed phase of AML/CFT transformation.
