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[ REGULATORY INITIATIVES ]
Either by explicit design or CDD Final Rule from covered firms to newly formed companies, with a two-year grace period
for existing LECs. The new framework will largely follow the Final Rule in applying generally only to shell companies.
The AMLA does retain the general program requirement that firms establish and enforce policies and procedures reasonably designed to identify and verify beneficial owners. However, it eliminates the most labor-intensive and costly aspects of the identification and verification process.4 The need to interpret the CDD Final Rule’s many interlocking, complex definitions and exceptions have heightened compliance risk. Compounding this complexity, firms have had to apply the CDD Final Rule considering the risks created by a firm’s unique business model. This has required an initial, comprehensive risk assessment and ongoing risk assessments, as business conditions and strategies change, to ensure that CDD compliance programs are adequately operationalized.
Firms’ compliance and risk management officers will need to await the final FinCEN rule that will clarify the details of the remaining CDD compliance obligations. A streamlined process is needed for firms to obtain beneficial ownership information from the FinCEN registry while ensuring that the LECs’ confidentiality is not compromised. The theme of confidentiality, a concern of many lawmakers, runs throughout the AMLA.
Enhancing information sharing and coordination among BSA stakeholders
The AMLA’s key aim is to create an infrastructure for sharing confidential information and coordinating compliance best practices between law enforcement authorities (LEAs), regulators and FIs, and between the firms themselves. In fact, information sharing and coordination is the first item on the list of the AMLA’s several stated purposes.
This purpose reflects the emerging consensus among policymakers and thought leaders that information sharing and coordination among BSA stakeholders will result in a more efficient and cost-effective AML/CTF regime. Chief risk and compliance BSA officers have long argued for a stronger safe harbor for sharing and coordinating efforts in reporting suspicious activity. Prohibitions on disclosing confidential information involving suspicious activity reports (SARs) and other filings has halted proactive and productive communication among banks and other FIs that could yield useful information for LEAs. The AMLA goes far in addressing what one senior thought leader has called a “tragic lack of cooperation” by creating a “utility” for information sharing, expertise and best practices in suspicious activity monitoring.5 The concept of such a “public-private sector” partnership, explicitly and implicitly, appears in many provisions of the AMLA.
Information sharing and coordination is the first item on the list of the AMLA’s several stated purposes
indirectly, several provisions in the
Anti-Money Laundering Act of 2020 (AMLA)1 are expected to reduce compliance costs and compliance risks2 for banks, capital markets firms and other financial institutions (FIs) subject to BSA compliance program requirements. Congress has previously acknowledged the significant cost BSA imposes on the private sector3 and policymakers’ cost awareness of anti-money laundering/ counter-terrorist financing (AML/CTF) compliance can be seen across many areas, ranging from regulatory modern- ization to information sharing and coordination. Thus, the AMLA reflects the BSA’s continuous evolution toward an “outcomes-based” compliance framework designed to achieve the U.S.’ law enforcement objective more effectively, which the AMLA now broadly reformulates as “national strategic priorities.”
This article examines four ways the AMLA will achieve these compliance benefits including relieving firms of the requirement to identify and verify the beneficial owners of corporate entities; enhancing information sharing and coordination between government authorities and firms; ensuring uniformity of compliance expectations; and explicitly requiring the Financial Crimes Enforcement Network (FinCEN) and other regulators to review and modernize AML/ CTF rules and regulations.
Shifting costly beneficial ownership due diligence to legal entity customers
One of the industry’s most sought-after reforms has been to create a central database of legal entity customers’ (LEC) beneficial owners, which FIs can use to satisfy their customer due diligence (CDD) obligations. The AMLA requires FinCEN to issue a rule on governing a beneficial ownership registry and to administer this database. The AMLA shifts the compliance obligation under the 2016
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