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Eight key points from the AML Reform Law

On December 11, Congress passed the latest National Defense Authorization Act, which among its many areas of focus contains the most significant changes to the anti-money laundering (AML) regime since the 2001 USA PATRIOT Act. Regulators, international standard setters, law enforcement and the industry have long recognized that the US AML framework is in need of modernization and while the past decade has seen task forces reevaluating the framework[1] and multiple AML reform bills appearing in Congress,[2] no significant changes were passed until now. Originally implemented in 1970, the Bank Secrecy Act (BSA) that created the current AML framework did not contemplate the technological advances available today. As a result, the industry has expressed frustration with the significant amount of resources it takes to comply with sometimes routine or check-the-box AML requirements, noting that those resources could be better spent innovating to address emerging threats and developing more proactive AML investigations processes.[3]

Among other provisions, the new law requires certain companies to disclose their “ultimate beneficial owners” (i.e., those who own at least 25% or exercise significant control over the company) to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which will develop a registry accessible by law enforcement or, with customer consent, financial institutions (FIs). It also requires that Treasury and FinCEN provide more transparency into their examination and supervision priorities, expand their scope to include areas such as antiquities dealers and digital currency, develop information sharing platforms and take measures to support innovation. Notably, the law does not include any adjustment to thresholds for Suspicious Activity Reports (SARs) or Currency Transition Reports (CTRs), but it does call for Treasury to allow for more streamlined reporting of certain information and to examine whether to raise the thresholds or make other simplifications to reporting requirements going forward.

In time, some of the changes such as modifications to reporting thresholds will represent significant relief to banks, but the overall impact will depend on the specific details of FinCEN’s implementing regulations. Meanwhile, many FIs that have been newly brought into scope by the law such as antiquities dealers and digital currency platforms now have work to do to strengthen their programs to meet regulatory expectations.

As of the date of publication, the President has threatened to veto the law for reasons unrelated to the AML provisions. While it passed both chambers of Congress with enough votes to override any potential veto, whether they would vote to do remains unclear.

This First take provides eight key points on the AML reform law’s impact on financial institutions. Here are the key takeaways:

  1. The long-awaited national beneficial ownership registry is coming.
  2. More emphasis on transparency and efficiency.
  3. Expanded BSA scope includes antiquities dealers, digital currency.
  4. Scrutiny heats up for foreign FFIs with US correspondent accounts.
  5. Push for innovation will accelerate change.
  6. FinCEN gets new tools and sharper teeth.
  7. Reporting thresholds left untouched but future changes to come.
  8. Loose ends.

[1] For example, in 2012 then-Under Secretary for Terrorism and Financial Intelligence David Cohen delivered a speech announcing a new task force with the federal financial regulators and enforcement agencies to “take a comprehensive look” at the AML regime and suggest measures to make sure it is “up-to-date and effective.”

[2] Key elements from recent bills, such as the Corporate Transparency Act, COUNTER Act and ILLICIT CASH Act, ultimately made it into the final law.

[3] See the Bank Policy Institute report, Getting to Effectiveness: Report on U.S. Financial Institution Resources Devoted to BSA/AML & Sanctions Compliance (October 2018).

First take

A publication of PwC's financial services regulatory practice

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Julien Courbe

Principal, Financial Services Advisory Leader, PwC US

Jeff Lavine

Global Financial Crimes Leader, PwC US

Vikas Agarwal

Financial Crimes Unit Leader, PwC US

Vasilios Chrisos

Financial Crimes Unit, AML Leader, PwC US

Elsie Pan

Partner, Asian Financial Services Consulting Leader, PwC US

Roberto Rodriguez

Director of Regulatory Strategy, PwC US

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