On November 15th, the ACAMS Carolinas Chapter held a virtual event to discuss the implications of The AML Act of 2020 (AMLA or Act) which was passed on January 1st 2021 as part of the National Defense Authorization Act. The event was moderated by Board Member Megan Nelson who is a Senior Vice President leading Governance and Risk Assessments within Truist’s Financial Crimes program. The speakers included:
Chip Poncy, Partner and Global Co-Head of Financial Crimes Risk and Compliance with K2 Integrity
Daniel Stipano, Partner at Davis, Polk & Wardwell LLP
The panel discussion began with a brief overview of the AMLA along with key provisions in the Act which include:
New Beneficial Owner requirements for certain entities;
Requiring the US Treasury to establish national AML and CFT priorities;
Increasing AML Whistleblower awards and an expansion of Whistleblower protections;
Modernizing the statutory definition of a financial institution (FI);
Enhancing penalties for BSA/AML violations;
Streamlined and modernized BSA/AML requirements while improving coordination among AML law enforcement agencies.
Chip kicked off the discussion by talking about some of the progress that has been made to implement the rulemaking and policy guidance of the AMLA. The panel discussed how the AMLA represents a decade plus of policy discussion globally, within the government, and within the industry on the effectiveness and efficiency of the AML regulation within the BSA and is “the most potentially transformative Act since the USA PATRIOT Act of 2001 with respect to financial integrity, transparency, and reporting.” The panel then agreed that the AMLA represents an attempt to transform the BSA. The transformation may look like a shift from a compliance focused, box checking effort for regulators and institutions to a modernized system that recognizes and rewards institutions for being effective and for providing information that is useful to law enforcement. All while looking for opportunities to utilize modern technology, promote information sharing, and streamline reporting requirements.
Dan noted that the AMLA requires FinCEN to issue around a dozen regulations within a tight timeframe along with studies and reports in addition to standing up a Beneficial Ownership registry. The panel hypothesized whether FinCEN would issue Advance Notices of Proposed Rulemaking (ANPR) for the other rules, as they did for the Beneficial Ownership registry. ANPRs allow FinCEN to collect information and hear from the industry before the issuance of a final rule. Chip noted that timeliness is one of the major trade-offs of conducting an ANPR.
The conversation shifted to a discussion of the National Priorities listed in the AMLA and how they fit into the broader scheme. FinCEN in consultation with OFAC, and others, set the National Priorities which include corruption, cybercrime, foreign and domestic terrorist financing, fraud, transnational criminal organization activity, drug trafficking and human smuggling, and proliferation financing. The panel agreed that there were no major surprises in the National Priorities and suggested FIs not get too far down the road incorporating the Priorities until the final rule is published. Instead, the group discussed FIs start thinking about their risk assessment and whether or not the institution has exposure to what is outlined in the Priorities. To the extent the FI has an exposure, it should ensure the controls are calibrated to manage the risk.
The panel switched gears to discuss several impacts of the AMLA. The group shared opinions on the future requirements to collect beneficial owner information for legal entities that are excluded from the new legislation but included in the current requirements. The AMLA exempts a wide range of entities from its definition of “reporting company” including larger U.S. companies which are defined as companies that physically operate in the U.S., employ over 20 full-time employees in the U.S. and have more than $5 million in gross revenue. Dan also talked about the Corporate Transparency Act (CTA) which was enacted as part of the AMLA and requires the establishment of a national registry of Beneficial Owners that will be available to law enforcement, regulators, and institutions with the permission of the customer. FinCEN will be required to maintain the registry. He noted that the language and definitions used in the AMLA differ from those used in the existing CDD rule related to beneficial ownership. Discussion ensued regarding these discrepancies and if that makes the AMLA additive but the panel arrived at the belief that within a couple of years, there will be an eventual alignment between the AMLA and a revised CDD rule.
Next, the panel discussed enhancements to the existing Whistleblower provisions of the AMLA which could result in significantly increased civil and criminal enforcement of AML violations in addition to removing the cap on what a whistleblower can be monetarily awarded tied to successful enforcement actions. Specifically, the panel contemplated whether or not the provisions to hold an individual liable are good. Concern was expressed about unleashing additional enforcement in an environment where expectations are not aligned (felt participants do not understand why we have these requirements in the first place).
The panel concluded the call by discussing action items related to the timelines of the Act. FIs should explore ways to share resources or information to allow for a collaborative conversation on risk and risk priorities between the public and private sector. The panel noted FinCEN is behind on completing the rules but will likely get some proposals out before the end of the year. The panel doubts the final rules will follow the AMLA timeframe given the need for Notices of Proposed Rulemaking. The panel addressed several questions posed around the Beneficial Owner registry. Specifically, whether verification of ownership would be required, whether FIs will be tasked with the verification or the reconcilement when discrepancies are observed, and documentation requirements.
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Blog Written by: Associate Board Member, Sean Marsden, CRC, CAMS