The Anti-Money Laundering Act of 2020: What Companies Need to Know | JD Supra (2024)

On January 1, 2021, Congress overrode President Trump’s veto of the National Defense Authorization Act for Fiscal Year 2021, an omnibus bill that includes the Anti-Money Laundering Act of 2020 (the “AMLA”).[1] The AMLA represents one of the largest reforms of the United States anti-money laundering (“AML”) laws since the 2001 Patriot Act. These reforms include the creation of a national registry that tracks the beneficial ownership information of certain entities, updated AML whistleblower provisions, penalty enhancements for violations of the Bank Secrecy Act (“BSA”), modernized statutory language to address the rise in cryptocurrency transactions, additional mandates to the Treasury Department (“Treasury”) to combat financing of terrorism and more. This alert highlights the key areas of the AMLA that companies should be aware of.

1. New Beneficial Ownership Requirements and National Registry

One of the most important reforms brought about by the AMLA pertains to corporate beneficial ownership reporting requirements.[2] Prior to the AMLA’s passage, corporations were not required to disclose beneficial ownership information at the state or federal level in the United States.[3] Proponents of a national registry for this information noted that this regulatory loophole allowed criminal actors to use shell corporations to disguise and transfer illicit funds. The AMLA aims to fill this gap through the following framework:

• “Reporting Companies” must provide information to the Financial Crimes Enforcement Network (“FinCEN”) for each “beneficial owner,”[4] including the owner’s (a) full legal name, (b) date of birth, (c) current residential or business address, and (d) the unique identifying number of an acceptable identification document (e.g., a driver’s license or a passport).
• The definition of a “Reporting Company” generally includes all private, for-profit entities that are not otherwise required to register with the Securities and Exchange Commission (the “SEC”), the Commodity Futures Trading Commission or a state insurance authority, and that employ fewer than 20 full-time employees and report less than $5 million in revenue on their federal income tax returns.[5]
• FinCEN will maintain a nonpublic national registry of this beneficial ownership information. However, FinCEN can make this information available in certain situations. For example, federal agencies engaged in national security, intelligence, or law enforcement activities can request this information “for use in furtherance of such activity.”[6] Additionally, state and local law enforcement agencies can request this information if a “court of competent jurisdiction has authorized the law enforcement agency to seek this information in a criminal or civil investigation.”[7] Further, financial institutions can also obtain beneficial ownership information, “subject to customer due diligence requirements, with the consent of the reporting company, to facilitate the compliance of the financial institution with customer due diligence requirements under applicable law.”[8]
• The time frame for reporting companies to report their beneficial ownership information depends on the type of entity involved. Existing entities, i.e., reporting companies formed or registered before the effective date of the AMLA, must report beneficial ownership information within two years of the effective date. Newly formed entities, i.e., reporting companies formed after the effective date, must report beneficial ownership information at the time of the entities’ formation. Reporting companies must also update their disclosures within one year of any change in ownership or control.[9]
• Last, the AMLA imposes steep civil and criminal penalties for violating the aforementioned reporting requirements. These include monetary fines of up to $10,000 and imprisonment for up to two years.[10]

2. The AMLA Whistleblower Provisions

The AMLA also provides new protections for AML whistleblowers along with a modernized whistleblower awards program:

• AML whistleblowers are now better protected from employer retaliation. Specifically, AML whistleblowers may now file a complaint with the Department of Labor when AMLA anti-retaliation rules are violated. If the complaint is not adjudicated within the requisite period of time, these whistleblowers can also seek recourse in federal district court.[11]
• The AMLA allows Treasury to pay AML whistleblowers 30% of any monetary sanction recovery (excluding forfeiture, restitution and victim compensation) when (a) the whistleblower voluntarily provides “original information” that leads to a successful enforcement action and (b) the sanctions exceed $1 million.[12]
• These added protections and incentives will likely have a significant impact on the reporting community. As a comparison, the SEC established a robust whistleblower program in 2010 under the Dodd-Frank Act, which is similar to the aforementioned AMLA changes.[13] The SEC’s program has been fruitful, to say the least. As of October 2020, the SEC Office of the Whistleblower had received 40,200 tips from individuals in the United States and in approximately 130 countries around the world.[14] Additionally, this program has produced some large whistleblower awards. For example, in October 2020, the SEC awarded $114 million to a whistleblower, which was the highest award in the program’s history.[15]

3. The AMLA’s Impact on BSA Compliance Programs and Reporting Obligations

While the AMLA affects compliance programs in many ways, compliance officers and executives of financial institutions should particularly be aware of the following:

• The AMLA codifies prior interagency guidance authorizing financial institutions to enter into collaborative sharing arrangements with other financial institutions for purposes of ensuring AML/BSA compliance.[16] Treasury and other supervising agencies will be in charge of establishing “best practices” for these arrangements.[17]
• The AMLA requires Treasury to establish national priorities for AML and countering the financing of terrorism (“CFT”).[18] The Act also requires financial institutions to incorporate these priorities in their risk-based compliance programs, and they will be a basis on which such institutions are examined in the context of BSA compliance.
• The AMLA makes additional modernizations of the AML/CFT regime, including but not limited to (a) requiring Treasury to issue rules regarding the standards for testing technology that is used to comply with the BSA;[19] (b) requiring FinCEN to establish streamlined and automated processes to permit the filing of noncomplex suspicious activity reports (“SARs”);[20] (c) mandating a review by Treasury to assess whether currency transaction reports and SAR thresholds should be changed;[21] and (d) expanding coverage of the BSA to regulate areas such as antiquities[22] and virtual currencies.[23]

4. Expanded Enforcement Authority Under the AMLA

The AMLA has expanded and amended the BSA enforcement provisions in a number of ways:

• The AMLA expands the authority of the Department of Justice (the “DOJ”) and Treasury to subpoena foreign banks with U.S. correspondent accounts for records related to any account at the bank, including records maintained outside the United States.[24]
• The AMLA amends the BSA to include new fraud-based prohibitions with respect to senior foreign political figures (“SFPFs”) or their family members or close associates and entities that are of primary money-laundering concern.[25] Specifically, for asset transactions of $1 million or above, SFPFs are prohibited from knowingly falsifying a material fact concerning the ownership or control of assets, or concealing it from or misrepresenting it to a financial institution. Entities that are of primary money-laundering concern face similar prohibitions,[26] and a violation by said SFPFs or entities may lead to fines, imprisonment or forfeiture.
• The Act heightens penalties that may be imposed under the BSA’s civil penalty provision, 31 U.S.C. § 5321. In the case of repeat BSA violations, Treasury may now impose additional fines, including up to the greater of (a) three times the profit gained or loss avoided as a result of the violation or (b) two times the maximum applicable penalty.[27]
• Similarly, the Act mandates additional criminal penalties for persons convicted of violating the BSA or a rule issued under it. The Act amends 31 U.S.C. § 5322 to allow for the imposition of (a) a fine in an amount equal to the profit gained by reason of the violation and (b) if the person is an individual who was a partner, director, officer, or employee at the time of the violation, repayment to the financial institution.
• Finally, the AMLA provides for additional Congressional oversight of deferred prosecution agreements (“DPAs”) and non-prosecution agreements (“NPAs”) that relate to the BSA.[28] The DOJ is now mandated to submit annual reports to Congress that contain a list of DPAs and NPAs entered into, amended or terminated with any person during that year for “a violation or suspected violation” of the BSA.

5. Provisions on Information Sharing, Coordination and De-Risking

Finally, the AMLA focuses heavily on increasing information sharing and coordination among the various parties that are subject to this Act, e.g., law enforcement agencies, financial institutions and the intelligence community.

• The Act creates new mechanisms for financial institutions to share BSA-related information with their foreign branches, subsidiaries and affiliates.[29] Treasury and FinCEN have been directed to create a three-year pilot program for carrying out this endeavor.[30] The DOJ is required to submit an annual report to Treasury that contains statistics, metrics, and other information on the use of data derived from financial institutions reporting under the BSA.[31] Treasury in turn will use this information to assess the usefulness of reporting under the BSA to law enforcement agencies and to provide feedback to the financial institutions subject to the BSA reporting requirements.[32]
• Finally, the AMLA addresses the practice of “de-risking,” i.e., avoiding risk by minimizing or ending certain business relationships instead of managing that risk, by studying its causes and effects through the Comptroller General of the United States.[33]

Conclusion

At nearly 1,500 pages, the AMLA represents a comprehensive effort to modernize the BSA and AML laws. While many of the Act’s changes bring about much-needed progress, numerous sections of the statute require additional rulemaking, analysis, reports and action that cannot yet be evaluated. Thus, it remains to be seen how this statute will truly affect financial institutions and private companies both domestically and abroad.

[1] H.R. REP. NO. 6395 (2020) at pg. 731 (Joint Explanatory Statement of the Committee of Conference).
[2] AMLA, § 6403.
[3] FATF, Anti-money laundering and counter-terrorist financing measures in the United States: Executive Summary 11 (2016), available at http://www.fatf-gafi.org/media/fatf/documents/reports/mer4/MER-United-States-2016-Executive-Summary.pdf.
[4] A “beneficial owner” is an entity or individual who (directly or indirectly) exercises substantial control over the entity or who owns or controls 25% or more of the entity’s ownership interest. AMLA, § 6403(a)(3)(A). This term does not include several types of entities and individuals, such as certain creditors of the entity, an individual acting as an intermediary or agent on behalf of another and individuals who act solely as employees of the entity. Id. at § 6403(a)(3)(B).
[5] Id. at §§ 6403(a)(11)(A), 6403(a)(11)(B). This term does not include publicly traded companies, certain nonprofits and government entities, certain financial institutions, such as banks, credit unions, broker-dealers, etc., and other entities that meet specific criteria.
[6] Id. at § 6403(c)(2)(b).
[7] Id.
[8] Id.
[9] Id. at §§ 6403(b)(1)(C); 6403(b)(1)(B).
[10] Id. at § 6403(c)(2)(B).
[11] Id. at § 6314.
[12] Id.
[13] U.S. Secs. & Exch. Comm’n, SEC Proposes New Whistleblower Program Under Dodd-Frank Act (last visited Jan. 13, 2021), available at https://www.sec.gov/news/press/2010/2010-213.htm.
[14] U.S. Secs. & Exch. Comm’n, 2020 Annual Report to Congress Whistleblower Report (last visited Jan. 13, 2021), available at https://www.sec.gov/files/2020%20Annual%20Report_0.pdf.
[15] U.S. Secs. & Exch. Comm’n, SEC Issues Record $114 Million Whistleblower Award (last visited Jan 13. 2021), available at https://www.sec.gov/news/press-release/2020-266.
[16] Financial Crimes Enforcement Network, Interagency Statement on Sharing BSA Resources PDF (last visited Jan 13. 2021), available at https://www.fincen.gov/news/news-releases/interagency-statement-sharing-bank-secrecy-act-resources.
[17] AMLA, § 6213.
[18] Id. at § 6101
[19] Id. at § 6209.
[20] Id. at § 6202.
[21] Id. at § 6205.
[22] Id. at § 6110.
[23] Id. at § 6102.
[24] Id. at § 6308.
[25] Id. at § 6313.
[26] Id.
[27] Id. at § 6309.
[28] Id. at § 6311.
[29] Id. at § 6212.
[30] Id.
[31] Id. at § 6201.
[32] Id.
[33] Id. at § 6215.