Compliance Matters recently interviewed Kieran Beer, the chief analyst at the Association of Certified Anti-Money Laundering Specialists in the United States, about US Government policy towards money laundering and the progress of legislation. The dialogue is presented in the form of a question-and-answer session.

Q: What was the most significant AML development in the US during the past year?

A: It's no secret, as the year comes to a close, that the Anti-Money-Laundering Act of 2020 is huge. [Editor's note: This is not yet an Act. Americans often pre-emptively refer to laws that they would like to see in force as 'Acts,' even though they are not.] It's contained in this year's National Defence Authorisation Act. [Editor's note: Again, not a real Act that is on the statute book.] The Anti-Money Laundering Act incorporates elements of the House Corporate Transparency Act and a Senate Bill called the ILLICIT CASH Act. [Ditto.] Altogether, this is the biggest thing in AML legislation and rule-making since the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act 2001 (the USA PATRIOT Act). [Editor's note: This, by contrast, is a real Act.] Among many other things, it is going to create a registry of beneficial owners of corporations. It is also going to change the standards by which financial firms will be examined.

Under the Act, the Financial Crimes Enforcement Network is charged with setting up and running the corporate ownership database as well as writing a lot of the regulations called for in the Act. FinCEN’s funding and centrality in AML/CFT oversight will be beefed up as result.

It’s important to say that while the broad outlines of this revolutionary legislation are clear, there are still a lot of details that will be worked out as FinCEN writes the regulations. For example, above what threshold of beneficial ownership will corporations be required to disclose to FinCEN – 25% or less?

Another big feature is that antique dealers and art dealers will be brought under the Bank Secrecy Act with a committee first making recommendations about what the regulation for art and antiquities should look like.

Q: Will the register be public, as in the United Kingdom?

A: No, it will not be public. The legislation makes the database accessible to financial institutions, law enforcement and federal and other oversight agencies, but with some restrictions. [Editor's note: It does nothing of the kind, but might do one day if it is passed.] Financial institutions will have to seek permission from customers to access their ownership filings with FinCEN [Editor's note: The word 'filings' is a reference to reports about beneficial ownership that the legislators want to compel customers to send off to the Internal Revenue Service's database in Detroit, to which FinCEN and several other agencies also have access] – something they will presumably require in order to open an account. But it isn’t clear whether they will be able to get blanket permission at account opening to consult the register should they see suspicious activity in an account after opening that might require enhanced due diligence [EDD]. If not, will they have to get permission from clients each time they consult the registry?

Separately, law enforcers will have to have a legitimate reason as to why they are accessing the database, but it appears that this will be a fairly perfunctory requirement that will not hamper their access to the registry.

Financial institutions have basically embraced the creation of the corporate registry because it relieves them of the primary responsibility they have had to collect ownership information under the FinCEN CDD Rule, but there is some concern about whether the requirement to consult account holders to view their ownership filing might be the equivalent of “tipping off” customers, i.e. letting customers know that they are being scrutinised.

It is important to note that President Trump has threatened to veto the National Defence Authorisation Act – an Act that Congress must pass every year to fund the military. He has till 21st December to sign the NDAA, actively veto it or exercise a 'pocket veto' by not returning it to Congress, but the House and the Senate have already passed the NDAA with veto-proof majorities.

Q: Is FinCEN growing in stature as a result of this process?

A: Under current law, FinCEN is the primary BSA regulator, but it is clearly getting new responsibilities and resources. In 2018 FinCEN made an earlier provision about banks making enquiries about the beneficial ownership of their legal-entity clients – the CDD Rule to which I referred earlier. It’s the regulation that gave banks the primary responsibility for collecting beneficial ownership information, which becomes FinCEN’s responsibility now.

Under the Act, FinCEN will create new standards by which examiners will judge banks. These include judging banks on the suspicious activity reports they write and how good a job they do overall in providing intelligence to law enforcement. The examining agencies will actually ask law enforcement to evaluate the regulated financial institutions they receive intelligence from. That’s novel and big.

Q: What are your observations about US AML enforcement actions in 2020?

A: The biggest enforcement action in the US was undoubtedly against Goldman Sachs – that involved a $3 billion penalty. It was related to the 1MDB case. Apart from that, it was a quiet year for enforcement at the federal level although there were some actions against individuals. FinCEN, notably, fined former US bank compliance officer Michael LaFontaine $450,000 in March. The big regulator this year (and last year) with regard to monetary penalties was not a federal regulator; it was the New York Department of Financial Services, which brought enforcement actions against Deutsche Bank and the Industrial Bank of Korea.

Q: What changes do you think the Biden administration will make?

A: I think you'll see some differences in the sanctions regime. There is likely to be a push on ABC [anti-bribery-and-corruption]. This is not strictly money laundering but involves laundering money and the crackdown on it is a worldwide trend. The UK has passed its own Magnitsky Act this year and so has the European Union, although they might not have named it after Magnitsky. It also seems evident that Biden would like to ease sanctions against Iran and reinstate the JCPOA [the so-called "Iran nuclear deal" on which the USA reneged under President Trump]. Biden would also probably like to ease sanctions against Cuba, as Obama did when he was in power.

Q: Do you think that 2021 will see more US regulatory activity in the digital arena?

A: Yes. Regulators will pay more attention to crypto-currency. This was the year in which the Department of Justice brought a lot of cases and ordered some big seizures. Federal prosecutors, for example, seized 300 crypto-currency wallets. We'll see more actions against rogue crypto-exchanges next year, both in the US and in Europe too. FinCEN has pushed for a lowering of the bar on the Travel Rule. It wants to tighten up global transactions in general.

* Kieran Beer can be reached at kbeer@acams.org