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AMLA a year on
On January 1, 2021, the United States
Congress passed the National Defense Authorization Act for Fiscal Year 2021
(the NDAA) which included the most significant reforms to US Anti-Money
Laundering (AML) laws in almost 20 years.
Known as the Anti-Money Laundering
Act of 2020 (AMLA), the new regulations were put in place to further strengthen
US defenses against the threat of terrorism and financial crime by addressing
the persistent problems of money laundering.
What does AMLA require?
Under AMLA, the Financial Crimes
Enforcement Network (FinCEN) was required to complete a wide range of
regulatory actions before the end of the year, including establishing AML and
CFT (Countering the Financing of Terrorism) priorities, issuing proposed rules
on AML/CFT requirements for antiquities and arts dealers, submitting a report
to Congress on reducing the burdens of filing suspicious activity reports
(SARs) and currency transaction reports (CTRs) and establishing a pilot program
for financial institutions to share information related to BSA reports with
their foreign branches, subsidiaries, and affiliates. But, perhaps the most significant
requirement under AMLA was the implementation of the Corporate Transparency Act
What is the Corporate Transparency
Current US laws do not require legal
entities to disclose information about their beneficial owners - i.e. those who
ultimately benefit financially from the entities' activities - and this has
enabled money launderers, criminals, and terrorists to remain anonymous while
facilitating illicit activity through legal entities in the United States.
Under the CTA, all domestic reporting
companies (entities formed in the United States) and any foreign reporting
companies registered to do business in the United States must report beneficial
ownership information (BOI) to FinCEN.
The proposed regulations define a
beneficial owner as any individual who meets at least one of two criteria; either
they exercise ‘substantial control’ over the reporting company, or they own or
control at least 25 percent of the ownership interest of the reporting company.
Any reporting companies that were created (or registered to do business) in the
United States before the effective date of the final regulations will have a
year to file their BOI, those created or registered after will have 14 days.
As part of the CTA proposals, FinCEN
is looking at how the burden of reporting BOI can be reduced for reporting
companies - particularly small businesses - so that preparing and submitting a
BOI report is affordable.
FinCEN argues that the implementation
of CTA will not only require reporting companies to submit BOI, but will also give
law enforcement, financial institutions, and other authorized users timely and
easy access to information that will help combat corruption, money laundering,
terrorist financing, tax fraud, and other illicit activity. As a result, it
wants to make compliance with the new rules as easy as possible.
Why have BOI regulations not been implemented
The creation of a new AML legal
framework is a long and detailed process, and following its implementation in
January 2021, AMLA mandated that FinCEN had to complete a number of actions within
a year, not that the new rules had to be operational.
with this deadline, in May 2021, FinCEN announced
an advance notice of proposed rulemaking (ANPRM ) on the recommendations to
implement the CTA’s BOI reporting provisions. A NPRM is a public notice that is
issued by law when an independent agency of the US government wishes to add,
remove, or change a rule or regulation as part of the rulemaking process and
looks to give the public an opportunity to review and comment on the proposals.
An ANPRM is generally issued to gain insight which will inform the NPRM.
Then, in December 2021, after securing
information and views, FinCEN issued a Notice of Proposed Rulemaking (NPMR).
Under this current NPRM - which is open until February 7, 2022 - FinCEN has proposed
its rules around the definition of reporting companies, the definitions of
beneficial owners, as well as the timeframes under which reporting companies
must report their BOI.
FinCEN then plans to engage in two
further NPRMs where, firstly, it plans to establish the rules around who will
be able to access this BOI information, why, and how, as well as looking at how
it will be recorded securely. And secondly, at a potential revision of its
customer due diligence rule in light of the implementation of the BOI rule. It
will also be looking at the logistics of implementing the rule, including a
technology system to host the BOI.
What about the other AMLA
As per the
timeline, FinCEN is also actively looking at a range of regulatory actions as
part of the implementation of AMLA, and in June, issued the first list of
national AML and CFT priorities to help financial institutions prioritize their
resources to administer effective compliance programs.
Then in September
2021, FinCEN announced an
ANPRM to solicit public comment on questions relating to the implementation of
AMLA amendments regarding the trade in antiquities. As part of AMLA, the definition
of ‘financial institutions’ has been amended to also include anyone
engaged in the trade of antiquities, since money launderers and terrorist
financiers are known to exploit certain characteristics of the antiquities
trade. With the ANPRM, FinCEN aims to discover how antiquities transactions are
typically financed and facilitated, the type of due diligence currently
undertaken, the areas of the market that are the most vulnerable to money
laundering and how “antiquities” should be defined for the purposes of AML
CEO at SmartSearch says updates
to US AML rules have been a long time coming but will make a significant
difference once they are put in place:
“AMLA is a hugely significant step
forward in the fight against money laundering and financial crime, and the proposals
under the CTA are absolutely key. However, while the requirement for reporting companies
to disclose BOI is crucial, it alone is not enough to make a significant
difference. FinCEN will also need to ensure that the BOI data gathered is both
accurate, and accessible by financial institutions so that they can use it to
facilitate their customer due diligence processes. It will also need to think
about the risk that those looking to cheat the system may be able to do so by
registering businesses not defined as ‘reporting companies’.
“At SmartSearch, we
have been ahead of the curve for some time in terms of the BOI information we
are able to access, and this enables our clients to run accurate checks on all
their corporate customers.
Business Reports service can identify and verify associated entities, directors, and
beneficial owners on corporates and entities in more than
200 countries, as well as providing business identification data and
consolidated financial information. As with all SmartSearch checks, the service
also includes screening for PEPs and Sanctions and ongoing monitoring with alerts about any changes, ensuring
customers remain compliant and audit-ready.”