Sigma Ratings has reviewed the history of anti-money laundering legislation in the United States and highlighted the groundbreaking Anti-Money Laundering Act of 2020. This is the most impactful piece of legislation in AML since the USA PATRIOT Act of 2001. As with all legislation, there are some shortcomings that leave vulnerabilities in corruption and financial secrecy. However, there are three key areas that are of major significance in the financial, corporate and Regtech sectors.
First, as noted in Sigma’s December article on the AMLA, the legislation calls for a corporate registry of beneficial owners. This will be the first of its kind in the United States and require certain U.S. and some non-U.S. business entities to report all natural persons who have “substantial control” (> 25%) over said entity. This database will be maintained by FinCEN and will provide a useful tool for ML investigations and enforcement - primarily targeting the abuse of shell companies. However, the registry will not be publicly available and while FinCEN does reserve the right to occasionally share the information with financial institutions, it can only do so with prior authorization from the reporting company. Hence, companies must continue to maintain their own risk-based customer due diligence (CDD) - preferably encompassing both financial and non-financial risks.
The legislation also sets forth the requirement for a restructuring of a set of national priorities in the AML space. The Treasury Department, in conjunction with the DOJ and a number of other government agencies, must publish renewed AML/CFT policy priorities within 180 days of the passing of the AMLA. Provisions also seek to modernize the national AML/CFT regime by accounting for emerging typologies. Such a shift will mean institutions must continue to stay abreast of policy priorities and regulatory guidance throughout the first half of 2021.
Last but certainly not least, is the introduction of examination criteria for financial institutions in this new decade. In an interview on the ACAMS Financial Crime Matters podcast, former Deputy Chief Council at the Office of the Comptroller of the Currency Daniel Stipano, outlines how regulators will now assess institutions more qualitatively and mere technical compliance. While the industry awaits further guidance from FinCEN on the particulars, Stipano notes that regulatory agencies under this new regime will “evaluate banks more on the basis of the quality of the information that they’re providing to law enforcement” as well as the outcomes facilitated by such financial intelligence.
There are a number of other provisions, including increased penalties for AML violations and expanded compensation for whistleblowers. Yet the overarching theme remains that not only do companies need to remain vigilant for emerging illicit finance patterns, but an overhauled regulatory landscape as well. With these paradigm shifts, the role of regulatory technology has become even more central as we move further along into the 21st Century.