AML Reform needs all of us – this year or hopefully next
We know that the current 116th Congress has another year before it is over; still there remains some speculation that the various AML bills in the House and Senate could move before the 2019 recess. While last week’s dramatic announcement of the start of an impeachment inquiry could prevent any legislative movement, the formal introduction in the Senate of the “Illicit Cash Act” warrants the attention of the entire AML community. As I have mentioned in many public forums, the House and Senate (in a surprisingly bi-partisan manner) have agreed to a comprehensive look at the laws and regulations challenging our community since 1986.
Key Provisions of Illicit Cash Act[i]
So where is the Senate on AML reform?
To be fair, the bill (S. 2563) does carry a large number of issues that have previously been addressed, but enhances them and adds the clear direction that only legislation can accomplish. For example, our law enforcement partners have often tried to provide feedback to regulatory filers since the start of AML, but there has been legitimate criticism that there is still a great deal more that could be done. Therefore, Section 202 that “requires” FinCEN to provide feedback to financial institutions regarding SARs is really no different than FinCEN’s current “SAR by the Numbers” or the now defunct publication (which I had a hand in creating) the “SAR Activity Review.” Legislation will force production and distribution of these reports; obviously a good thing since we saw their value when they were previously available.…
Also, Section 107 mandating Treasury work on international cooperation with groups such as FATF and the United Nations does beg the question of why it needs to be in a bill when it has gone on for many years.
There are plenty more examples of issues similar to those above, but now on to the new enhancements.
Having just returned from the ACAMS 18th Annual Conference in Las Vegas and moderating a panel with our regulatory partners, I came away convinced that addressing both examination priorities and examiner training is essential for any true AML reform.
The opening salvo in S. 2563 are provisions to emphasize the “risk-based nature” of AML programs and to have Treasury establish national exam and supervision priorities for BSA compliance. We have previously written about a number of agency “guidances” that stress risk focus (despite what some may say, this is a new direction for examiners, not a decades old process; still welcome, nonetheless); place Treasury in the mix (and hopefully seeking comments from private sector AML stakeholders) and would be a major step toward logic and fairness in the BSA.
The Title III of the bill bears reviewing since it includes some potentially innovative changes including: allowing the filing of structuring SARs in “bulk data” form, which could be a major efficiency play. There are also a number of studies that can improve the infrastructure, especially focusing on de-risking and charities---an issue we have spent quite a bit of time on as well.
A push toward necessary (and actual) transparency
Since we have been following the various legislative vehicles attempting to catch the white whale of piercing the shell company veil (yes an intentional mixed metaphor), we need to note the most important part of both the Senate and House AML bills---requiring beneficial ownership reporting directly to FinCEN. A study in Title IV of the bill would look at whether this change could result in changes to other reporting requirements (i.e. CDD) as well. The key can be summed up by the statement of one of the co-sponsors of the bill, Senator Mark Warner (D-Va) who said:
“As bad actors use ever more sophisticated techniques, we need to make sure federal agencies have the tools they need to prevent this abuse of our financial system and protect our national security. That starts with making sure we have a full usable record of who actually owns these shell companies.”
Equally important to the potential impact of these measures is the support from organizations such as Polaris, the FACT Coalition, the National Association of District Attorneys and of course those of us in the AML community who have been advocating for infrastructure change for years.
Keep watching this space for more updates and read the bills and summaries and push for real change.
[*] The Heat is On---written by Harold Faltermeyer and Keith Forsey but recorded by Glenn Frey from the 1984 movie, “Beverly Hills Cop” and was #2 on the Billboard charts…
[i] https://www.scribd.com/document/427611462/ILLICIT-CASH-Act-As-Introduced (yes, the bill is an acronym and someone actually spent time coming up with words to match “Illicit Cash”….)