Understanding the Anti-Money Laundering Act of 2020
The Anti-Money Laundering Act (AMLA) of 2020 is the most substantial anti-money laundering and counter terrorism legislative reform since the implementation of the USA PATRIOT Act of 2001.
Congress enacted the AMLA of 2020 in January, which brings the most significant changes in the Bank Secrecy Act of 1970.
Here are the major provisions of the AMLA of 2020:
Beneficial ownership reporting
Certain corporations and limited liability corporations (LLCs) will be required to file beneficial ownership information about their company to the Financial Crimes Enforcement Network (FinCEN), which will maintain a national beneficial ownership database.
This bill is aimed at collecting beneficial ownership on U.S. entities with fewer than 20 full-time employees and no more than $5 million in gross annual income. This differs from the Customer Due Diligence/Beneficial Ownership Rule, which requires covered U.S. financial institutions to collect and verify beneficial owners on all corporations, LLCs and partnerships, regardless of employee size or annual income.
The beneficial ownership information collected by U.S. financial institutions is currently not shared with FinCEN or any other governing body unless disclosed in the filing of a suspicious activity report (SAR).
Streamlined reporting of SARs and CTRs
SAR filing threshold amendments are being considered. Currently, requirements include filing a report if the suspected activity was at least $5,000 or more and a “subject” was identified or was $25,000 or more when no “subject” was identified.
These thresholds were implemented more than 20 years ago and, according to FinCEN, have led to 1,116,400 million SARs being filed in 2019 by depository institutions.
The sheer volume of filings made it difficult for law enforcement to identify significant violations that would require additional investigation. Due to the complexity of the SAR, filing a report is time consuming and, in many cases, would not be subject to a law enforcement investigation.
The proposed SAR threshold increase is from $5,000 to $10,000. The Currency Transaction Report (CTR) filing threshold of currency transactions in excess of $10,000 conducted on the same business day was set in 1970 and has never been adjusted for inflation. The proposed increase is from cash transactions over $10,000 to cash transactions over $30,000.
The Federal Register reported over 16 million CTRs filed in 2019.
The AMLA will require the implementation of a more streamlined, automated process to allow financial institutions to file noncomplex reports without the burdensome regulatory requirements.
Cross-border SAR sharing
For financial institutions with U.S. affiliates or foreign parent organizations, FinCEN will implement a three-year pilot program to allow the sharing of SAR information for the purpose of combatting illegal financial activity. This sharing may be prohibited if the affiliate or parent organization is located in a country subject to U.S. sanctions.
Expanded whistle-blower protections and awards
The act includes anti-retaliation protections against whistle-blowers who report Bank Secrecy Act/Anti-Money Laundering (BSA/AML) violations. In addition, if an enforcement action by the Department of Justice or the U.S. Treasury is over $1 million in civil money penalties, the whistle-blower may receive up to 30% of the penalites as a reward. The act also increases the dollar amount of the fines on entities or individuals who are convicted of violating the BSA and has a carve-out for additional penalties for repeat offenders.
Expansion of government resources
The AMLA allows for extra resources for expanding staff within FinCEN and counter-intelligence agencies. This supports FinCEN’s commitment to provide more frequent communications with financial institutions on current BSA/AML risks, allowing them to be proactive, and is evidenced by the multiple guidances released by the agency regarding COVID-19-related fraud schemes.
Application to other mediums: BSA/AML requirements would apply to mediums other than financial institutions and money services businesses and may be expanded to include cryptocurrency (such as bitcoin) and other valuable items that substitute for currency, such as fine art and antiques dealers.
How Wipfli can help
Our compliance team has the experience needed to keep up with the ever-changing regulatory environment for financial institutions. Learn more about how our certified AML specialists bring real-world experience to provide the guidance you need on our Regulatory Compliance Services web page.