Introduction: What Is The Anti-Money Laundering Act of 2020?
The Anti-Money Laundering Act of 2020 (“AMLA”) is a new law which makes certain important amendments to the Bank Secrecy Act (“BSA”). It was enacted in January 2021.
While the core purpose of the AMLA is prevent the movement of money through US financial institutions intended for the funding of terrorism and for the purpose of laundering the proceeds of criminal enterprises, this new law carries enormous implications and potential consequences for both individuals and small businesses as well.
For financial institutions, the AMLA imposes new and more arduous reporting and compliance requirements. From individuals and small businesses, the AMLA requires other things.
This post will examine 5 provisions of the AMLA of key importance for individuals and small businesses.
- Whistleblower Awards
Whistleblowers are, very generally, individuals working within an organization who disclose information regarding fraud or illegality within or by that organization.
Under the AMLA, a “whistleblower” is defined as:
… any individual who provides, or two or more individuals acting jointly who provide, information relating to a violation of this [law] … to the employer of the individual or individuals, including as part of the job duties of the individual or individuals, or to the [Treasury] Secretary or the Attorney General.
Thus, the provisions of the AMLA dealing with whistleblowers restrict the benefits of the AMLA to those reporting violations of the AMLA itself either directly to their employer(s) or to the U.S. Secretary of the Treasury or to the Attorney General of the United States.
An individual reporting wrongdoing, therefore, to The New York Times or other media platform would not be considered a whistle blower.
However, that the AMLA does not require whistleblowers to report information to their employers first before reporting it to the government—even if they are compliance officers or internal auditors or others whose daily duties involve reporting legal violations to the employing organization.
This is a significant departure from other Federal whistleblowing statutes.
What do whistleblowers get for their trouble under the AMLA?
The statute allows whistleblowers to apply for rewards if the tips they provide lead to monetary penalties in enforcement actions. The potential reward is up to 30% of the total penalty or settlement.
Further, the AMLA allows whistleblowers to file retaliation suits against their employers if their disclosures have led to adverse treatment at work.
- Corporate Transparency Requirements
Another important section of the AMLA is the Corporate Transparency Act (“CTA”).
This CTA is intended to prevent the use of shell corporations in the commission of fraud, the funding of terrorism, and other illegal acts. It requires corporations, LLCs, and other entities to file reports regarding their beneficial ownership with the US Department of Treasury.
While one might presume that such a regulation is designed for larger enterprises, it is actually aimed specifically at smaller businesses and alleged shell companies.
Prior to the enactment of the CTA, a corporation or LLC could be created without revealing the identity of the individual or individuals in actual control or who might benefit financially from the existence its existence.
Thus, a corporate entity could be used to conceal the money laundering activities or other illegal operations engaged in by criminals or criminal enterprises without revealing the identities of those involved.
The CTA exempts from this reporting requirement existing businesses with a physical presence in the United States with at least 20 employees and a minimum of $5 million in annual revenue.
In other words, if your corporation is a functioning U.S. business with legitimate operations, you may not be subject to these requirements.
A “beneficial owner” is defined under the CTA as a natural person (i.e., a human being) who exercises substantial control over the company, owns 25% or more of the company’s equity interests, or who receives substantial economic benefits from the assets of the company.
The beneficial owner will need to be reported at the time of the entity’s formation and, thereafter, annually.
The personal information of this beneficial owner is required to be reported to the U.S. Treasury Department’s Financial Crime Enforcement Network (FinCEN) one year from the date of enactment of the CTA.
- Definition of “Financial Institution” Expanded
Financial institutions face significant new requirements under the AMLA and the BSA to report suspicious activity and other information to FinCEN.
The AMLA expands the definition of a “financial institution” to include businesses that could potentially be used for money laundering purposes, including some small businesses.
The definition is expanded, firstly, to include dealers in crypto-currencies. The AMLA defines crypto- or virtual currency broadly as “value that substitutes for currency.” The Act sweeps in foreign persons providing virtual currency services, including currency exchangers and money transmitters.
Additionally, the AMLA includes “dealers in antiquities” in the definition of financial institution. This is defined as a person engaged in the trade of antiquities, including advisors, consultants, or any other person engaging as a business in the solicitation or sale of antiquities.
The scope of the reporting obligation on dealers in antiquities has yet to be elaborated by the Secretary of the Treasury and FinCEN, but the statute requires that this be done by January, 2022.
While it may seem surprising that the mom and pop antique store in your neighborhood could conceivably be required to submit Suspicious Activity Reports (“SARs”) to FinCEN under this rule, the growth at the top end of the antiquities investment market has been skyrocketing. The antiquities trade is, therefore, highly susceptible to use in money laundering operations.
Other businesses covered by the AMLA include:
- Insurance companies;
- Travel agencies;
- Casinos with revenues over $1,000,000;
- Dealers in precious metals, stones, or jewels;
- Non-bank lending companies;
- and others.
- Financial Institution Information Sharing
The AMLA’s new information sharing requirements for financial institutions will also have an indirect impact on individuals and small businesses.
Financial institutions will now be allowed to share SARs with foreign branches and subsidiaries, except those in Russia, China, and select other areas.
The AMLA will also now allow the Secretary of the Treasury and the U.S. Attorney General to issue subpoenas to a non-U.S. banks with correspondent account in the U.S. for records located outside of the U.S.
This significant expansion of U.S. jurisdiction is designed to enable U.S. regulators and their investigators to “follow the money” even when it leads to a cross-border jurisdiction. The AMLA further creates a Treasury Attaché program in U.S. embassies to foster coordination with foreign counterparts.
- Enforcement Provision Upgrade
Finally, the AMLA upgrades enforcement of its requirements in a number of key respects.
The Secretary of the Treasury can now impose additional monetary penalties upon repeat violators of AMLA requirements, up to 3 times the profit gained or loss avoided from the violating activity.
Individuals who have repeatedly violated the AMLA will be barred from service on boards of directors of U.S. financial institutions for a period of up to 10 years.
Partners, directors, officers, and even employees of financial institutions that run afoul of the Act will be personally required to repay any bonus paid during the year in which the violation occurred.
Significantly, the AMLA levies a prison sentence of up to 10 years and a maximum $1 million penalty upon certain individuals for concealing, falsifying, or misrepresenting material facts regarding the source of assets utilized in a financial transaction with a value of at least $1 million.
Legal Representation and Compliance
The AMLA is a major piece of legislation and we have merely summarized its provisions here.
If you believe you or your business may be affected by some portion of the AMLA, contact one of our attorneys. We may be able to help you develop a compliance program to ensure that you do not run afoul of this new law.
If you are contacted by government agents about a legal issue that could be AMLA related, contact an attorney right away.
The AMLA represents a significant tightening of existing anti-money laundering statutory provisions that will reach further than ever before into the personal details of business owners, the sources of the assets and funds underpinning financial transactions, and the sources of such funds, wherever they are located.
While the scope and reach of many of these provisions await specific definition by FinCEN and the Secretary of Treasury, it is clear that the statute will impact many individuals and small businesses who would not have felt the impact of the BSA in prior years.
If you are personally concerned in particular with the possibility of an investigation of possible money laundering under the AMLA’s enforcement provisions, contact us for a free consultation.