United States

AML modernization bill passes while Senate explores illicit Cash Act


The Corporate Transparency Act (H.R.2513) was passed by the House on Oct. 22, 2019. It will provide for the creation of a national database through FinCEN that can be used to verify a business’s beneficial ownership information. The act will also include the modernization of the current Bank Secrecy Act/anti-money laundering (BSA/AML) framework, including enhancing enforcement communications between banks and law enforcement.

The Senate is also exploring passing its own bill, the Illicit Cash Act. This act calls upon the Treasury to establish exam and supervision priorities to supplement and guide financial institutions. The Illicit Cash Act also requires periodic law enforcement feedback to financial institutions on their suspicious activity reports, a streamlining of reporting requirements, a review of currency transaction report and suspicious activity report thresholds, and a review of current guidance to remove outdated or unnecessary regulations and guidance.

Should these bills pass and become law, financial institutions could see some changes to the BSA/AML framework. Having a database of beneficial ownerships will allow more transparency into the customer due diligence/ enhanced due diligence process. With the passing of these bills comes better communication between law enforcement, regulatory agencies, and financial institutions when it comes to suspicious activity. Modernization of the current AML framework could make for fewer burdensome BSA programs across the United States.

Important things for clients to note from these bills, should they pass:

The Corporate Transparency Act:

  • The scope of this bill is similar to the requirements of FinCEN’s Customer Due Diligence (CDD) Rule, but different in important ways:
    • Exempts many operating companies, and focuses primarily on limited liability companies and shell companies.
    • Requires Treasury Department to adjust the FinCEN CDD Rule to conform to the act within one year of enactment—this will require banks to modify the current program.
  • Financial institutions will only be able to access the information with customer’s consent.
  • Rule will be issued requiring periodic updates of ownership information, this may present opportunity/obligation for institutions to update the information at the same frequency.
  • This will prohibit issuance of bearer shares by U.S. or tribal entities.     

Counteract section:

  • Establishes pilot program to permit financial institutions to share information with foreign branches with exceptions for Russia, China and sanctioned countries
  • Allows financial institutions to collaborate on compliance initiatives
  • Bars individuals committing egregious BSA violations from serving on board of U.S. financial institutions Provides for additional penalties for repeat BSA violations
  • Addresses innovation: encourages innovation, establishes innovation labs, develops testing methods for implementing new technology

Illicit cash:

  • Allows/potentially obligates financial institutions to incorporate law enforcement feedback into monitoring/CDD/EDD processes.
  • Provides safe harbor to financial institutions for keeping accounts open at law enforcement request.
  • Establishes an approval/testing regime at FinCEN for new monitoring technologies. This is optional, but clients will need to watch to see if it evolves into a requirement. 

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