AMLA 2020: Seen Through The Compliance Lens
Between 2020 and 2021, we’ve witnessed several significant events that have changed the national and global economic landscape. One of those changes is the Anti-Money laundering (AML) Act of 2020, which was passed by Congress with an overwhelming majority. It was passed as a part of the NDAA, but despite being an element of a relatively more comprehensive act, the bill is responsible for making the most extensive changes in the AML legislation since the Patriot Act of 2001.
The Anti-Money Laundering (AML) Act of 2020 (AMLA 2020) is transformative for AML compliance, the following are some significant changes that compliance professionals need to know.
The AMLA 2020 amended the law to mandate that the Secretary of the Treasury "shall" pay an award to whistleblowers whose information leads to the successful enforcement of anti-money laundering laws, but the statute does not provide a reward "floor," meaning whistleblowers may walk away with only a nominal award.
The reward is also increased to 30% of the monetary penalty imposed on the whistleblowers' employer, while previously there was a cap. However, there are worries that this reward might entice an organization's compliance professionals to become whistleblowers and that it might force financial institutions to start thinking along the “who is watching the watchers” lines. From an AML perspective, it can ensure that financial institutions will take more stringent AML measures to avoid costly financial penalties.
Corporate Transparency Act (CTA)
Under the CTA, a beneficial ownership registry will be implemented by FinCEN regulated by Financial Crimes Enforcement Network (FinCEN). This registry will have the details of the beneficial owners of the business, which is defined as any individual who exercises substantial control over a business entity or has more than 25% of the business entity's ownership interest. This move is expected to curb the money laundering threats that the ease of owning and operating a business entity in some US states poses. Businesses will have a two-year grace period, and failure to comply comes with hefty financial and criminal penalties.
Risk-Based Approach to AML/CFT Compliance Codification
The AMLA 2020 provides guidelines for financial institutions to use their risk assessment to better target customers and activities that present a higher risk of illicit activity. This will allow the financial institution to make better use of their resources. This also means that financial institutions need to properly conduct risk assessments, obtain quantitative and qualitative information from relevant internal and external sources in order to identify, manage, and mitigate identified risks. Regulators are expected to also use a risk-based approach on their supervision obligations.
Enhanced Subpoena Authority
The AMLA 2020 grants significantly more power to DOJ to subpoena any foreign banks with operation within the U.S. Now, federal courts and DOJ can enforce compliance more aggressively and are capable of laying civil penalties on foreign banks that don’t cooperate with DOJ when it comes to disclosing the origins of suspected transactions (among other things).
The AMLA 2020 provides for the creation of a “Subcommittee on Innovation and Technology” to advise the Secretary of the Treasury on innovation with respect to AML and calls for BSA “Innovation Officers” and “Information Security Officers” at FinCEN and other federal financial regulators. This should facilitate the instruction of new technologies, such as AI, at financial institutions to monitor for suspicious activity. This could be a game-changer for the instruction and acceptance of new technologies.
Overall the AMLA 2020 brings welcome changes in some areas and may result in big improvements in others. I might trigger significant policy changes and more rapid adaptation of new technologies and a more agile approach to mitigate risks brought about by new money laundering and terrorism finance typologies. The compliance industry will have to evolve, embrace change, and protect in order to better protect their financial institution.
How ComplyGenics Can Help
Many Fintech companies do not have the resources at hand to properly navigate an environment of increasingly complex regulations and compliance measures. ComplyGenics is here to help. We provide such services as compliance audit and program remediation, AML rule tuning, and model validation, helping you mitigate risks and keep up with the best industry KYC and FCP standards. We also specialize in staffing for the niche, helping you connect the right talent for your firm within the industry. For more information, visit our site or contact us.