A Field Guide to Coming AML/BSA Reforms

By Robert Rowe

New year, new anti-money laundering regime.

On Jan. 1, Congress passed the National Defense Authorization Act. Included in the law were several anti-money laundering provisions collectively known as the Anti-Money Laundering Act of 2020, or AMLA—the first significant changes to the Bank Secrecy Act since the USA Patriot Act was adopted nearly 20 years ago.

What’s remarkable is that while bipartisanship was often lacking in the last Congress, the AML reform provisions were advanced and ultimately adopted through true bipartisan efforts. Overall, the goal for the changes are to promote information sharing and coordination, modernize the system, encourage technological innovation, reinforce the risk-based approach and establish uniform beneficial ownership requirements. Importantly, many of the changes reflect longstanding ABA priorities and efforts.

A new federal registry

A core part of the revisions is the creation of a federal beneficial ownership registry to be managed by the Financial Crimes Enforcement Network. Efforts to establish a federal beneficial ownership registry go back many years, and a number of bills have been introduced in Congress over the years to create such a registry. The current efforts grew out of the Corporate Transparency Act introduced by Rep. Carolyn Maloney (D-N.Y.) and reflect many years of deliberations about what such a registry should be and how it should operate.

ABA has often pointed out that one of the challenges bankers face when collecting beneficial ownership information is that they have no way to verify the status of a beneficial owner, a point that we persuaded FinCEN to incorporate into the regulatory requirements. While ABA had hoped that the statute would let banks rely solely on the registry, Congress made clear that banks must still collect the information from our customers. However, once customers are familiar with the registry process, it should simplify the collection of beneficial ownership information. And banks will now have a way to verify the information, which is something customers will know, so it should help reduce potential disparities. ABA has encouraged Treasury to reach out to the public to ensure businesses are aware of this new requirement since this will be a major change for businesses. Fortunately, ABA was able to convince Congress that once a company is registered, they only need to file when there are changes, not every year. And, contrary to some myths that arose during the legislative process, companies will only be penalized for willful and deliberate failure to register.

For the time being, banks should continue to follow their existing procedures for collecting beneficial ownership information. Before anything changes, FinCEN will have to create the registry. The agency also must update its current regulation, a step ABA strongly advocated. In updating the rule, FinCEN is required to eliminate any duplicate or unnecessary steps and ABA has already started to discuss the changes with FinCEN.

Information sharing

One of the other major changes in the legislation is one that ABA has long advocated: greater information sharing and feedback from law enforcement. In fact, better feedback from law enforcement was a key element in recommendations from a blue-ribbon panel convened by ABA on BSA reform in 2008. There are several elements in the new law to promote information sharing and feedback from law enforcement.

One of the first steps to promote information sharing will be the creation of a set of law enforcement priorities designed to help bankers allocate resources to the highest risks. The goal with the priorities is to get away from the current scattershot approach to identifying suspicious activity and instead focus on areas where law enforcement has particular concerns, such as human trafficking, elder financial exploitation, or pandemic-related fraud. Another provision will require FinCEN to share threat…