On January 2, 2021, the United States Congress enacted the National Defense Authorization Act for 2021 (H.R. 6395) (NDAA of 2021 or the Act), which passed both the House of Representatives and Senate in early December but was vetoed by the President in late December, by voting to override the President’s veto on the legislation. The NDAA of 2021 includes banking industry backed provisions to modernize, enhance, and reform anti-money laundering processes as outlined in “Division F – Anti-Money Laundering Act of 2020” of the legislation. Division F includes four main AML components for reform: 1) Title LXI – Strengthening Treasury Financial Intelligence, Anti-Money Laundering, And Countering The Financing Of Terrorism Programs; 2) Title LXII—Modernizing The Anti-Money Laundering and Countering the Financing of Terrorism System; 3) Title LXIII—Improving Anti-Money Laundering and Countering the Financing of Terrorism Communication, Oversight, And Processes; and 4) Title LXIV – Establishing Beneficial Ownership Information Reporting Requirements.
The Act states the purposes of Division F – Anti-Money Laundering are to:
- Improve coordination and information sharing among the agencies tasked with administering anti-money laundering and countering the financing of terrorism requirements, the agencies that examine financial institutions for compliance with those requirements, Federal law enforcement agencies, national security agencies, the intelligence community, and financial institutions;
- Modernize anti-money laundering and countering the financing of terrorism laws to adapt the government and private sector response to new and emerging threats;
- Encourage technological innovation and the adoption of new technology by financial institutions to more effectively counter money laundering and the financing of terrorism;
- Reinforce that the anti-money laundering and countering the financing of terrorism policies, procedures, and controls of financial institutions shall be risk-based;
- Establish uniform beneficial ownership information reporting requirements to
- Improve transparency for national security, intelligence, and law enforcement agencies and financial institutions concerning corporate structures and insight into the flow of illicit funds through those structures;
- Discourage the use of shell corporations as a tool to disguise and move illicit funds;
- Assist national security, intelligence, and law enforcement agencies with the pursuit of crimes; and
- Protect the national security of the United States; and
- Establish a secure, nonpublic database at FinCEN for beneficial ownership information.
A few of the highlights of the Act to achieve these purposes are as follows. The Act charges FinCEN with creating a national registry of Beneficial Ownership information that banks would be able to utilize when completing their customer due diligence requirements. In addition, BSA reporting requirements will be analyzed. For example, within one year after the date of enactment, and annually thereafter, the Attorney General, along with other officials, is directed to report to the Secretary of the Treasury information on the use of data derived from financial institutions reporting under the Bank Secrecy Act. And, the Secretary of the Treasury, along with other officials, are directed to review current BSA reporting requirements for streamlining and updating reporting thresholds. Also, worth noting is the establishment of the FinCEN exchange which will facilitate a voluntary public-private information sharing partnership among law enforcement agencies, national security agencies, financial institutions, and FinCEN; that the Act codifies the risk based approached to AML compliance; increases penalties in certain cases; and enhances whistleblower incentives and protections.
No specific action by financial institutions seems to be required at this time since many of these reforms hinge on actions first required by government authorities. However, financial institutions should be aware of the reforms contained in the NDAA of 2021 and begin reviewing the law in anticipation of how it might impact their institution. Continue to watch the Compliance Resource blog for more information as these reforms unfold. Also, be sure to periodically check the “Training” page of our website for 2021 BSA related trainings.
Questions? BSA related questions can be posted to our BSA/AML forum.