This article was reviewed by Emily Sachs, CAMS
Anti-money laundering (AML) regulations were established in the United States with the passage of the Bank Secrecy Act (BSA) in 1970.
But that doesn’t mean AML law has remained stagnant for the past 50+ years. Since the BSA was signed into law, Congress has periodically passed new legislation and regulations designed to expand on the anti-money laundering frameworks established in the BSA. Some important examples include the Money Laundering Control Act (1986), Annunzio-Wylie Anti-Money Laundering Act (1992), and USA PATRIOT Act (2001).
A recent addition to this list? The Anti-Money Laundering Act (AMLA) of 2020, which is the first major new AML law passed in the United States since 2004.
Below, we explain what the AMLA is and take a look at its key provisions.
What is the Anti-Money Laundering Act of 2020?
The Anti-Money Laundering Act of 2020, also known as the AMLA or AML Act, is a law designed to build upon and expand existing AML legislation in the United States, such as the Bank Secrecy Act. It was passed by Congress on January 1, 2021 as a part of the National Defense Authorization Act (NDAA).
The AMLA is enforced by the Financial Crimes Enforcement Network (FinCEN), which is also tasked with implementing many of the provisions contained within the law.
Key provisions of AMLA
According to FinCEN, the goal of the act is to “strengthen, modernize, and streamline the existing AML regime by promoting innovation, regulatory reform, and industry engagement.” It does this through a number of provisions, which we discuss in greater detail below.
Requires new sectors to comply with AML law
The AML requirements established by the BSA (and subsequent laws) only apply to businesses that the law deems to be financial institutions. Under AMLA, “financial institutions” was expanded to include businesses that sell antiquities, including art dealers and galleries.
AMLA also formalized a 2019 joint statement issued by FinCEN, the Securities Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC) that expanded the definition to include cryptocurrency exchanges and other businesses that “provide services related to value that substitutes for currency.”
Reforms penalties under the Bank Secrecy Act
AMLA established two new criminal offenses under the BSA that are punishable by up to 10 years in prison, a fine of up to $1 million, or both.
If a politically exposed person (PEP) is involved in a transaction involving aggregate assets worth $1 million or more, it is illegal for that individual to knowingly conceal, misrepresent, or falsify information about the ownership or control of those assets.
Likewise, the Act made it a crime to knowingly conceal, misrepresent, or falsify information about the source of funds in a transaction involving any entity deemed to be a “primary money laundering concern.”
The Act also enhances punishment for violators of the BSA, including introducing civil penalties for repeat violators of up to three times the profit made or loss avoided. Certain “egregious” BSA violators may face prison time for criminal convictions as well as fines equal to the profits gained. If a partner, director, officer or employee of a financial institution is found to have committed a BSA offense, they risk losing their bonuses through clawbacks.
Requires FinCEN to establish a new beneficial ownership database for US businesses
A subsection of AMLA, known as the Corporate Transparency Act (CTA), requires FinCEN to establish and maintain a beneficial ownership registry of certain domestic and foreign businesses operating in the United States. The registry is mandated to collect the following information about beneficial owners from covered corporate entities:
- Full legal name
- Date of birth
- Current residential address
- Current business address
- Copy of ID
These reporting requirements are scheduled to go into effect on January 1, 2024. FinCEN provides an annual update to Congress on its progress implementing this complex program. In 2022, the agency reported being behind schedule, but doubled down in April 2023 on the original deadline.
The FATF estimates that 30 million existing US companies will be mandated to file this information, or face punishment. This figure is considerably lower than it might have been due to a list of 23 possible conditions for exemption. Those exempt from the requirement include:
- Publicly traded companies
- Banks, bank holding companies, and credit unions
- Securities brokers and dealers
- Public accounting firms
- Political organizations
- Companies with more than 20 employees, operating in a physical location in the US and making at least $5 million in annual gross revenue per prior tax returns
The information contained in this registry will be non-public, although it can be disclosed to certain parties under certain circumstances:
- Law enforcement or federal agencies who have a court order
- Financial institutions performing customer due diligence (CDD) checks that have the consent of the reporting company
This provision helps the United States comply with Recommendation 24 from FATF’s list of 40 recommendations to combat money laundering — and brings it in line with many European nations that already have beneficial ownership registries in place.
Establishes new priorities for AML and CFT policies
AMLA requires FinCEN, in conjunction with other government offices and agencies, to establish national, government-wide priorities in the fight against money laundering and the financing of terrorism. In June 2021, FinCEN released the following list of AML/CFT priorities:
- Corruption
- Cybercrime
- Terrorist financing
- Fraud
- Transnational criminal organization activity
- Drug trafficking organization activity
- Human trafficking / smuggling
- Proliferation financing
These priorities were selected, in part, because they are used to generate illegal funds, which are then commonly laundered through global financial systems.
Covered institutions are now required to consider each of these priorities as they design and implement AML/CFT policies.
Expands whistleblower protections
Under AMLA, if a whistleblower reports information related to known or suspected BSA violations or activities related to money laundering, employers are prohibited from retaliating against them. This is true whether the whistleblower makes the report to their employer or a governmental party.
Retaliatory acts include, but aren’t limited to: Demotion, discharge, threats, and other forms of harassment.
Expands subpoena powers
Prior to AMLA, the US Attorney General and Secretary of the Treasury could only issue subpoenas to foreign banks if a.) those banks held correspondent accounts in the United States, and b.) the subpoena was related to transactions processed through those accounts.
AMLA significantly expands this subpoena power by removing these restrictions. Foreign banks with correspondent accounts in the US may now be subpoenaed for information regarding any account that is subject to an AML investigation — not just information related to correspondent accounts.
Increases information sharing with foreign branches and subsidiaries
Under AMLA, FinCEN and US financial institutions are now permitted to share SARs and other information related to AML efforts or investigations with their foreign branches, subsidiaries, affiliates, and partners. Financial institutions headquartered in certain countries (including China and Russia) are excluded from this provision.
The provision also requires FinCEN and the US Treasury to carry out a three-year pilot study that quantifies the impact of this information-sharing.
Streamlines filing process for non-complex SARs
AMLA also directs FinCEN to design and implement a new, automated filing process for the filing of non-complex suspicious activity reports. The goal is to modernize the filing process to account for the “sophisticated AML compliance systems now managed by most financial institutions.”
The Act also requires the US Treasury to determine whether the current dollar thresholds that trigger SAR and Currency Transaction Report (CTRs) filing requirements are adequate or if they should be adjusted.
Effect of AMLA on your compliance program
Consisting of more than 1,500 pages, AMLA is widely viewed as one of the most impactful expansions of US AML law in decades. Because many of the law’s provisions have yet to go into effect, it’s impossible to predict all of the impacts it will have once fully implemented.
What is clear, however, is that financial institutions must have a plan — and the right AML tools — for complying with these provisions.
Persona’s suite of identity tools — from identity verification to supplemental reports to manual review, link analysis, and more — is perfectly situated to help you build the compliance program that’s right for you, no matter how deeply your company is impacted by AMLA’s new provisions.
Interested in learning more? Start for free or get a demo today.
