New Enhancements to Anti-Money Laundering Law - an Overview

New Enhancements to Anti-Money Laundering Law - an Overview

The most recent amendments to the Anti-Money Laundering Law are part of the most comprehensive reform of anti-money laundering laws in the United States since the passage of the USA PATRIOT Act in 2001. On January 1, 2021, Congress overrode President Trump’s veto and passed the Anti-Money Laundering Act of 2021 (“AMLA”) which is part of the National Defense Authorization Act. The law will amend the Bank Secrecy Act (“BSA”) for the first time since 2001. Among the most important changes are disclosures about beneficial owners, expanded subpoena powers, adjustments in the whistleblower program and increased penalties.

Disclosing their beneficial owner

One of the purposes of the AMLA is to establish uniform beneficial ownership information reporting requirements to ensure more transparency. According to the AMLA, many (smaller) companies are required, for the first time, to disclose to the government their beneficial owners (“Reporting Companies”). Reporting Companies are limited liability companies or corporations, but also similar non-U.S. companies that are registered or registered to do business in the United States. Reporting Companies must report personal information to Financial Crimes Enforcement Network (“FinCEN”), identifying their natural persons as beneficial owners and the applicants who establish or register the entities.

The expanded ability of subpoenas against foreign banks

The AMLA expanded and amended the BSA enforcement provisions in several ways. The amendments provide for a clearer application of the regulations authorizing U.S. enforcement agencies to subpoena records from foreign banks that have a correspondent account with U.S. banks and if the banks do not comply, to require the U.S. banks to terminate those accounts. Specifically, this eliminates potential loopholes or possible grounds for resisting a subpoena. An important expansion of the government’s authority is to request not only the foreign banks’ records in relation to the U.S.-based correspondent account but to any account at the foreign bank.

Whistleblower program

The new regulations create additional incentives for reporting BSA/AML violations and expand the law's existing BSA whistleblower provisions to allow greater rewards for reporting violations that result in civil penalties or criminal fines in excess of $1,000,000. This requires reporting the violation to the whistleblower's employer, the Department of the Treasury, or DOJ, and successful administrative or judicial enforcement action. As a reward, the whistleblower may then receive an award of up to 30% of the fine or penalty imposed on the violating party. In addition, the AML whistleblowers are now better protected from employer retaliation, in particular with the opportunity to file a complaint with the Department of Labor when AMLA anti-retaliation provisions are violated.

Increased penalties

The AMLA imposes additional civil penalties on individuals who violate the BSA after having done so previously. For each additional violation, repeat offenders will face additional penalties, effective immediately, of three times the amount of profit gained or loss avoided as a result of the violation or twice the maximum allowable penalty for the violation, whichever is greater. The earlier violation must have occurred after the law's effective date of January 1, 2021. Furthermore, the AMLA includes new prohibitions on knowingly concealing or misrepresenting a material fact from or to a financial institution, for example, regarding the source of funds in a transaction involving an entity that is a primary money laundering concern.

Conclusion

The AMLA contains several provisions that could lead to significantly increased civil and criminal enforcement of AML violations. This far-reaching reform includes comprehensive amendments. First, it increases the banks' obligations to disclose information. Secondly, it also expands the powers of regulators to obtain information. The expansion of the whistleblower program and the increased penalties provide incentives to comply with the applicable rules. Although actual implementation may still take some time, financial institutions and their stakeholders, the board of directors, and foreign affiliates should be prepared and make the necessary adjustments.

Julius H. F. Henneberg serves as a graduate editor of the NYU Journal of Law & Business. He is an LLM candidate at NYU School of Law where he focuses on white-collar criminal law. Julius is also a research assistant to Professor Jansenson. Prior to attending NYU he worked as an attorney at law at Hogan Lovells International LLP and finished his doctoral thesis in the area of white-collar criminal and banking law. Before that, he was a research assistant in several law firms and the Federal Ministry of Justice.