On January 1, 2020, Congress voted to override the president's veto of the National Defense Authorization Act for Fiscal Year 2021 (NDAA), enacting the most significant overhaul of the Bank Secrecy Act and related anti-money laundering laws since the USA PATRIOT Act of 2001. The NDAA substantially amends Title 31 and sets a busy regulatory agenda for the incoming administration's Treasury Department and the Financial Crimes Enforcement Network (FinCEN).
A blackline comparison reflecting all of the substantive amendments to Title 31 is available here.
Several notable amendments include:
- Beneficial Ownership Registry. By January 1, 2022, the Treasury Secretary is required to issue regulations requiring corporate entities (generally and subject to exceptions, any corporation, LLC, or other similar entity with 20 or fewer employees and annual gross income of $5 million or less) to report beneficial ownership information to FinCEN, which will be maintained by FinCEN for at least five years after the date on which the reporting company terminates and made available upon request to financial institutions (with consent of the reporting company) carrying out customer due diligence obligations, as well as law enforcement, regulators, and certain other agencies.
- Enhanced Whistleblower Program. Bringing the AML whistleblower provisions closer in line with the SEC whistleblower program, the new law provides that one or more whistleblowers who voluntarily provide original information leading to the successful enforcement of violations of the AML laws in any judicial or administrative action brought by the Secretary of the Treasury or the Attorney General resulting in monetary sanctions exceeding $1 million (including disgorgement and interest but excluding forfeiture, restitution, or compensation to victims) will receive not more than 30 percent of the monetary sanctions collected. The new whistleblower provisions also provide for enhanced protection of whistleblowers and authorizes the Treasury Secretary, in consultation with the Attorney General, to issue regulations implementing the provisions.
- Information Sharing and SAR Confidentiality. The NDAA provides various enhancements relating to information sharing under the BSA. For example, by January 1, 2022, the Treasury Secretary, in coordination with FinCEN, is required to issue rules establishing a pilot program permitting financial institutions to share information relating to SARs with foreign branches, subsidiaries, and affiliates (except those located in China, Russia, or certain other jurisdictions) for the purpose of combating illicit finance risks. The existing confidentiality provisions were also amended to incorporate FinCEN's rules of construction prohibiting from disclosure any information that would reveal that a transaction has been reported.
- Expanded Subpoena Authority for DOJ and Treasury. The new law permits the Department of Justice (DOJ) and Treasury to subpoena foreign-located bank records if the foreign bank maintains a US correspondent account and without regard to whether the correspondent account was used as part of the potential violation of US law. This new authority may be exercised in any investigation of a violation of federal criminal law, in civil asset forfeiture proceedings, and in any investigation conducted under the BSA/AML laws and regulations. The expanded authority also provides for: (i) civil penalties of up to double the amount of the suspected criminal proceeds sent through a correspondent account of a foreign bank if the foreign bank on which a subpoena is served discloses the existence or content of such subpoena to any account holder involved or any person named in the subpoena; and (ii) civil penalties of up to $50,000 per day for failure to comply with a subpoena. See our Advisory for a more detailed discussion.
- Increased Penalties. The revised statute provides various enhancements to the penalty provisions under Title 31. For example, new section 5322(e) provides that an individual or institution convicted of a violation the BSA will be fined in an amount that is equal to the profit gained by such individual or institution by reason of such violation, and, if the person was a director or employee of the institution at the time of the violation, certain bonuses must be repaid to the institution. Repeat violators of AML laws and regulations may be subject to three times the profit gained or loss avoided by such person as a result of the violation or two times the maximum penalty with respect to the violation. In addition, individuals are now statutorily prohibited from knowingly concealing, falsifying, or misrepresenting a material fact concerning (i) the ownership or control of assets involved in large monetary transactions involving senior foreign political figures or (ii) the source of funds in certain monetary transactions involving an entity found to be a primary money laundering concern, and any person convicted of doing so, or conspiring to do so, is subject to up to ten years in prison and up to $1 million in fines. Finally, the NDAA also provides for a ten-year bar from serving on the board of directors of a US financial institution for any individual found to have committed an egregious violation of the BSA.
- Expanded Duties and Powers of FinCEN. The NDAA adds to the powers and duties of the Director of FinCEN in order to address Treasury priorities, respond to industry concerns regarding the burden of BSA/AML obligations, and keep up with innovation in the industry. Among other additions, the duties and powers of the Director now include communicating with the industry and regulators regarding Treasury priorities, exchanging information on recordkeeping and reporting, and maintaining technology experts to encourage the development of and identify emerging technologies that can assist the government or financial institutions in countering money laundering and the financing of terrorism. The Director also is now explicitly empowered to make rules to implement the public priorities as established through consultation with the Attorney General, federal and state regulators, and other agencies under new section 5318(h)(4)(A).
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