A Deeper Dive into the Anti-Money Laundering Act of 2020 By Richard S. Fechter, CFE, JD, CAMS; and Jorge Guerrero, CPA, CFE
What comes to mind when you think of money laundering? Perhaps it’s the classic cliché of funneling suitcases of money from illicit activities into legitimate businesses that transact heavily in cash, such as car washes, bars and restaurants, casinos and laundromats? While some instances of money laundering take this form, they often take on more complex and robust configurations.
For decades, the U.S.’s signature anti-money laundering legislation (AML) was the Currency and Foreign Transactions Reporting Act of 1970, better known as the Bank Secrecy Act (BSA). Congress subsequently amended the law several times, attempting to modernize it and bring 21st-century solutions to 21st-century problems. However, the results were a patchwork of regulations that left significant gaps and vulnerabilities in the U.S.’s AML regime. Enter the Anti-Money Laundering Act of 2020 (AMLA 2020), signed into law on Jan. 1, 2020, as a part of the National Defense Authorization Act.
The AMLA 2020 aims to combat the perpetual game of cat-and-mouse that money laundering perpetrators play with investigators and prosecutors. Among its most significant reforms, the law does the following:
- creates a federal-level beneficial owner registry for businesses,
- expands the regulatory scope of the Bank Secrecy Act to include businesses dealing in “value that substitutes as currency” and
- enhances current whistleblower protections and rewards.
Beneficial Ownership Disclosure
One of the most impactful consequences of the AMLA 2020 is a federal requirement to identify the “beneficial owners” of certain new and existing corporate entities by their full legal names, dates of birth, current residential or business addresses and copies of acceptable identification documents. The law defines “beneficial owners” as those who directly or indirectly own 25 percent or more of a legal entity or “exercise substantial control” over such entity. It also requires the Secretary of the Treasury to maintain a registry of those beneficial owners “in a secure nonpublic database” that only authorized persons may access for limited uses.
Value Substituting as Currency
The AMLA 2020 clarifies that financial institutions covered by the BSA include currency exchanges, money-transmitting businesses and other entities that provide services (including the collection and transmission of certain fund transfers) related to “value that substitutes for currency.” This includes convertible virtual currency and digital assets and individuals “engaged in the trade of antiquities, including advisors, consultants or any other persons who engage as a business in the solicitation or the sale of antiques.” You heard that right; antiques and works of art can and have been used by various terrorist organizations and criminal networks to launder money and transfer value. To combat this, AMLA 2020 has added dealers in antiques to the definition of “financial institutions” subject to the BSA.
The law also requires the Secretary of the Treasury, in conjunction with the FBI, Attorney General and Department of Homeland Security, to “perform a study on the facilitation of money laundering and the financing of terrorism through the trade in works of art.” The study has been completed and submitted to Congress, which issued a Notice of Proposed Rulemaking with public comments received earlier this year.
Enhanced Whistleblower Protections and Rewards
Although the BSA authorizes payments to whistleblowers who provide original information leading to the collection of fines, penalties and forfeitures, it has not impacted money laundering enforcement. This is likely because the language of the law deemed whistleblower rewards discretionary rather than obligatory and capped them at $150,000. The AMLA 2020 fixes these issues, updating the language to state that the Secretary of the Treasury “shall” issue payments to whistleblowers and capping rewards at “30 percent of total collected monetary sanctions exceeding $1 million.”
Finally, the law enhances whistleblower protections by prohibiting employers from retaliatory actions, such as demotions, discharges, threats and harassment of whistleblowers.
About the Authors: Richard S. Fechter, JD, CFE, CAMS, is an associate director with Berkowitz Pollack Brant’s Forensic and Advisory Services practice, where he conducts forensic accounting investigations and provides expert analysis on the economic, finance, and accounting issues pertaining to economic damages and other business matters in complex commercial disputes. He can be reached at the CPA firm’s Miami office at (305) 379-7000 or firstname.lastname@example.org.
Jorge Guerrero, CPA, CFE, is a manager with the Forensic and Advisory Services practice of Berkowitz Pollack Brant, where he conducts forensic accounting financial investigations and economic damages analyses while also serving as a litigation consultant on forensic accounting matters relating to bankruptcy and receivership, breach of contract, shareholder disputes and asset misappropriation. He can be reached at the CPA firm’s Miami, Florida office at (305) 379-7000 or email@example.com.