Modernized regime and enhanced resources
The AMLA also seeks to modernize the existing AML/CFT regime to account for emerging finance channels and to provide greater resources to the government to address money laundering. For instance, it expanded the definition of financial institutions and money transmitting business under the BSA to include, consistent with existing FinCEN regulations, entities that provide services involving “value that substitutes for currency” – a category that includes stored value and virtual currency instruments (e.g., cryptocurrencies). Antiquities dealers, advisors and consultants were also added to the definition of “financial institutions” that are subject to the BSA and FinCEN’s CDD Rule.
The AMLA requires FinCEN to establish streamlined processes, including automated processes, to file certain categories of noncomplex SARs, including potentially for structured transactions, which could lessen compliance burdens. In establishing those processes, FinCEN is required to consider structured transactions and certain fund and asset transfers with little or no apparent economic or business purpose. The Office of the Comptroller of the Currency (OCC) has endorsed the automated filing of SARs for structuring, but FinCEN has not yet done so.
AMLA also requires FinCEN to solicit feedback from law enforcement on SARs and provide information to financial institutions on SARs they filed. AMLA requires DOJ to provide the Treasury Department with an annual report that includes statistics, metrics, and other information on the use of data derived from SARs and other reports filed by financial institutions, including whether such reports contained information acted on by law enforcement agencies. FinCEN must also publish, at least semi-annually, threat pattern and trend information and typologies, including data to be included in algorithms as appropriate, to inform financial institutions about the preparation, use, and value of SARs.
Additional resources to combat money laundering and to enforce money laundering laws were also enumerated within the AMLA. These include a voluntary public-private information-sharing partnership between law enforcement agencies, national security agencies, and FinCEN; the creation of FinCEN domestic liaison roles to oversee various US regions; the appointment of BSA “Innovation Officers” and “Information Security Officers” at FinCEN and other federal financial regulators; the appointment of six Foreign Financial Intelligence Unit Liaisons; the creation of a Treasury Financial Attaché Program; and other provisions designed to strengthen cooperation among law enforcement and national security agencies, both within the US and abroad. These measures are expected to enhance the ability of US enforcement authorities to detect and prosecute AML/CFT violations as well as predicate offenses such as corruption, fraud, or narcotics offenses.
Increased penalties for AML violations
The AMLA allows the Secretary of the Treasury to impose additional civil monetary penalties for certain repeat violators of AML 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. In addition, the new law requires certain partners, directors, officers, or employees of financial institutions convicted of violating the BSA are required to repay any bonus paid to that individual during the calendar year during which or after the violation occurred. Importantly, any individual found to have committed an “egregious violation” of the BSA is barred from serving on the board of directors of a US financial institution for 10 years from the date of conviction or judgment.
SAR sharing with foreign affiliates
Under current FinCEN guidance, financial institutions may only share SARs outside of the United States with parent companies. AMLA provides for a three-year pilot program under which financial institutions may share SARs with foreign branches, subsidiaries, and affiliates, except for foreign branches, subsidiaries, and affiliates in certain locations such as China, Russia, and jurisdictions subject to US sanctions. The pilot program is subject to a two-year extension at Treasury’s discretion.
National AML priorities
Within 180 days of the AMLA’s passage, the Treasury Department, in consultation with the DOJ, as well as relevant state and federal regulators and national security agencies, must establish and publish defined AML and CFT policy priorities. These priorities must be consistent with the national strategy for countering the financing of terrorism and related forms of illicit finance as described under Section 261 of the Countering Russian Influence in Europe and Eurasia Act of 2017 and must be renewed every four years. Following the publication of these priorities,
FinCEN, in conjunction with the relevant regulators, has another 180 days to adopt regulations to ensure compliance. Subject financial institutions’ compliance programs will be assessed, in part, on the risk-based approach taken to incorporate these priorities once established.
Congressional reporting
Section 6311 of the AMLA requires the DOJ to report to the Congressional judiciary and banking committees, on an annual basis, all deferred prosecution agreements, and non-prosecution agreements that the DOJ has entered into during the prior year with respect to any violation or suspected violation of the BSA. The report must include the justification for the action taken, the factors considered, and the extent to which the DOJ coordinated with other regulatory agencies before entering into the settlement.
Expanded Subpoena Authority
The AMLA 2020 expands the U.S. Department of Justice's subpoena authority over foreign financial institutions. It gives the secretary of the treasury and the attorney general authority to issue subpoenas to foreign financial institutions that maintain correspondent accounts in the United States with regard to any account records in their possession, a significant expansion from the prior authorization which was limited to records relating to U.S. correspondent accounts. The third part of this series will explain those new provisions and their implications for foreign financial institutions as well as foreign individuals and entities under investigation.
New Penalties for Concealing Transactions Involving Senior Foreign Political Figures.
Finally, the AMLA 2020 amends the BSA to include criminal penalties prohibiting willful concealment from financial institutions of transactions involving senior foreign political figures and certain designated entities of money laundering concern. Most notably, the prohibition extends criminal penalties to anyone involved in the concealment, misrepresentation, or falsification (or attempted concealment, misrepresentation, or falsification) to a financial institution of material facts regarding the ownership or control of assets exceeding $1 million by a senior foreign political figure (or any immediate family member or close associate). The penalty gives sharp teeth to the transactional diligence process and will undoubtedly enhance the quality of diligence received by financial institutions vetting account holders and transactions. Like other recent anti-money laundering disclosure rules—such as the real estate-related global targeting orders that have been issued and continually expanded over the last several years—this may have important implications for expanding anti-corruption enforcement. This provision will be explored in the fourth installment of our series.
Expansion of AML Law to Codify Jurisdiction Over Virtual Currency Activities.
The AMLA 2020 codifies prior FinCEN guidance that requires entities that conduct certain virtual currency business activities to register as money services businesses. By expanding the definitions of terms like “financial institution” and “money transmitting business” the new law includes businesses that exchange or otherwise transmit virtual currency or “value that substitutes for currency.” FinCEN guidance was controversial in the industry, and its codification in statute will create additional challenges and opportunities.
Developing an Emerging Financial Technology Focus.
The AMLA 2020 puts in place the impetus for financial regulatory agencies and the Government Accountability Office to conduct studies and provide reports to Congress and develop capabilities to better understand and adapt regulatory frameworks to address emerging fintech technologies. The law directs FinCEN to maintain emerging technology experts to identify emerging technologies such as artificial intelligence, digital identity technology, and distributed ledger technologies that may be able to assist the government and financial institutions to counter money laundering and terrorist financing. The federal financial regulators are directed to study emerging payment methods like virtual currencies and peer-to-peer payment systems and provide reports to Congress on their use in money laundering and illicit activities. The federal financial regulators have been advancing the use of emerging technologies by financial institutions, and the AMLA 2020 directs FinCEN to establish a no-action letter process, which provides the opportunity for the industry to better understand the technology solutions acceptable to regulators for BSA compliance.
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