- Laura Martino, Associate General Counsel, Global Jet Capital
- Audrey Koh, Partner, Avonhurst
- Claire Rauscher, Partner, Womble Bond Dickinson (US) LLP
Federal agencies have powerful new tools to combat money laundering in the form of the Anti-Money Laundering Act of 2020 (AMLA). The AMLA expands corporate reporting requirements, gives federal investigators greater power to obtain financial records, and imposes stiff penalties for unlawful activity and non-compliance. This Legal Quick Hit also examined comparable anti-money laundering efforts in both the EU and UK.
National Defense Authorization Act (NDAA)
- Enacted Jan. 1, 2021, overriding President Trump’s veto
- Contains Anti-Money Laundering Act of 2020, which includes:
- Corporate Transparency Act
- Combatting Russian Money Laundering Act
- Kleptocracy Asset Recovery Rewards Act
- These statutes update anti-terrorist & anti-money laundering laws in response to increasing threats.
Anti-Money Laundering Act of 2020 (AMLA)
- The most sweeping anti-money laundering changes since 2011’s Patriot Act.
- Imposes new “beneficial owner” reporting requirements on companies registered/formed in the U.S.
- Expands Treasury Dept’s ability to obtain records from foreign banks with U.S. correspondent accounts
- Establish stronger whistleblower programs
- Include cryptocurrencies within the scope of the Bank Secrecy Act (BSA)
- Add antiquities dealers to BSA
“Beneficial Owner” Reporting Requirements
- Goal is to discourage use of shell corporations & encourage transparency.
- Every “reporting company” must submit the following information to FINCEN:
- Full Legal name of beneficial owner(s)
- Date of Birth
- Residential or business address
- Unique identifying number (passport, driver’s license, etc.)
- Reporting companies formed or registered prior to effective date have no more than 2 years to report. If formed after the effective date, must submit to FINCEN at time of formation or registration.
Who is a “Beneficial Owner”?
- An individual who directly or indirectly, owns or controls 25% or more of the ownership interest of the entity or exercises “substantial control” (not defined) over the entity.
- Exempted: Banks, bank holding companies, savings & loan holding companies, federal and state credit unions, certain investment companies, insurance companies, registered public accounting firms, certain public utilities, certain entities registered with the CFTC, and tax exempt 501(c)(3) organizations.
- Look for future clarification (inc. “substantial control”) from FINCEN.
Confidentiality of Information
- FINCEN is generally required to keep the reporting companies’ submitted information confidential with certain exceptions (law enforcement, Treasury Dept. for tax administration, etc.)
Penalties for Willful Failure to Disclose/Providing False Information/Unlawful Disclosure
- Significant civil & criminal penalties for violations.
- Reporting violation: Up to $500 civil fines/day. Also up to 2 years imprisonment & $10,000 criminal fine.
- Unauthorized disclosure of beneficial ownership information: Up to $500 civil fines/day; Also up to 5 years’ imprisonment & $250,000+ fines.
Expanded Ability to Obtain Records from Foreign Banks with U.S. Correspondent Accounts
- Treasury Dept., DOJ can issue subpoenas to any foreign bank that maintains a correspondent account in the U.S.
- Expands reach to ‘any account at the foreign bank’- not just account records in the U.S. Significant change in law.
- If foreign bank fails to comply—after 10 days’ notice from Treasury or DOJ, financial institution must terminate correspondent relationship.
- $50,000 fine per day for correspondent bank’s failure to comply.
Enhanced Whistleblower Incentives
- Entitled to up to 30% of any penalty over $1million if original information results in a successful action. Exceeds prior $150,000 cap
Cryptocurrencies Now Included Under Bank Secrecy Act
- Both current & future cryptocurrencies covered.
- General Accounting Office (GAO) directed to study role of different payment systems in the facilitation of drug & human trafficking.
Bank Secrecy Act Now Applies to Antiquities Dealers
- Antiquities dealers have become a significant source of money laundering.
What is the Impact and Ramifications of the AMLA?
- Lots of questions, but few answers at this point.
- Safe Harbor from liability if relying on FinCEN data?
- Will financial institutions need to file SAR if there are deficiencies in Registry data versus customer data?
- Will the onus fall on financial institutions if a customer is not registered?
- How will this data be used?
What do the Anti-Money Laundering Efforts Look Like in the EU?
- Similar requirements already in place in Europe and the UK (measures re: beneficial owner information, cryptoasset businesses and art dealers).
- Sixth EU Anti-Money Laundering Directive (6MLD) came into force at EU level in 2018. EU member states had until December 2020 to implement into national law. Regulated entities have a deadline of June 3, 2021.
Features of 6MLD (Eurocrime Directive)
- 5MLD widened the scope of firms/individuals who would be caught by it, but left some ambiguities relating to what constitutes a ‘money laundering offence’.
- 6MLS creates a unified, wide-ranging list of 22 predicate offences – cybercrime introduced for the first time. Expands what constitutes “aiding and abetting.”
- Extends vicarious criminal liability to companies and accompanying sanctions.
- Increases penalties for individuals (although many member states already have much higher maximum penalties).
Impact of 6MLD in the UK Post-Brexit?
- UK decided to opt out of 6MLD. Domestic legislation already largely compliant with the Directive and in many cases, the UK already goes much further.
- However, regulated businesses which are UK-based (e.g. UK financial institutions) that have dealings with EU member states need to make sure that they meet the obligations of 6MLD.
Current State of Play in the UK
- Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (Amending Regulations) of 2019—Implemented 5MLD in the UK. Amended the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), which implemented 4MLD.
- Sanctions and Anti-Money Laundering Act 2018 (SAMLA). New power for UK government to use to amend or replace MLR 2017, once the UK is no longer bound by EU law.
“The Brief” provides Compliance and Ethics Network members with a brief overview of highlights and key points covered in the monthly Legal Quick Hit. The full recording of this presentation can be found on the ACC website.