This Week in AML

Latest on the ENABLERS Act

The US House of Representatives is acting on proposed amendments to the National Defense Authorization Act, including the ENABLERS Act. John and Elliot discuss the status of the amendments and what is likely to make it into the version that goes to the US Senate.





Elliot Berman: Hi, John, how are you today?

John Byrne: I'm good. Elliot. How are you?

Elliot Berman: I'm good too. We've had a couple of beautiful days here in the Midwest, and I've been learning about a bunch of new things. And today, they're actually taking votes in the house on amendments to the enablers act.

We, which we talked about a few weeks ago. A piece of legislation extends broadly speaking, extending some of the provisions of the bank secrecy act to lawyers, accountants, trusts, and others involved in financial transactions. And it's been attached to the national defense authorization act.

So it's actively looked and, I know you were, watching the live telecast of the vote. So what's going on with that?

John Byrne: Well, it's, it's still going on, and it does tell you that this is why Congress is; how can we phrase it carefully? How they're unable to really do anything. If you remember how a bill becomes law, you know, you can introduce a bill, go through committee, and go to the floor.

While that still happens, it's only these major pieces of legislation, like the NDAA, that even allows it. Sort of adjacent, sometimes not very clearly connected, and amendments to be included. So that's, what's going on, and it's probably gonna go all day. We're recording this on Thursday, but I thought it was important to highlight a bunch of things and to just say to folks that are paying attention to these sorts of activities, it's HR; 7,900 is the bill.

So if you go to house.gov you can certainly take a look at massive amounts of provisions. There are over a thousand amendments, maybe even more, so it's hard to sort of navigate, but I thought there were a few things that we should at least highlight because some of these will make it through. This has to go through the Senate after the house.

More than likely, if it's in the house provisions, it'll stay in the Senate provisions, obviously depends on are there voice votes? Are there, you know, roll calls, that kind of stuff, but there are a few things in there. There's a numberer of provisions amendments on corruption.

Anti-corruption offices to deal with that were in there also. The proverbial safe banking act that we've seen that has been around for a numberer of years that would deal with the issue that many of our clients struggle with. And that is, you know, given the fact that you're trying to decide whether you're gonna bank marijuana businesses, and, you know, marijuana is still a schedule one or whatever the category is control substance.

So this, this safe banking act, which again has been around for a numberer of years, would give a safe Harbor for institutions that decide to go ahead and bank. And obviously, they'd have to do their proper due diligence. So that's in there. We had talked about domestic PEPs that were considered out of order so that amendment did not make it through.

So whether it comes back up again in the Senate is still a question. But as we've mentioned before, domestic PEPs, some of our clients already screened for those, but many do not. And obviously, this would add its requirements that they don't. They're not currently oversight from the regulators.

We'll see what happens with that, but also a couple of other ones I thought were interesting. One would extend the statute of limitations for money. Specifically for those that relate to oligarch. So if you get an oligarch that's laundered money, you'd extend the statute of limitations. So you'd have a longer period of time to prosecute. So that's obviously a reaction to what's going on in Ukraine. And similar to that, another amendment that any assets captured from oligarchs would be designated to help rebuild Ukraine. So that's interesting. Again, as I said, a number of provisions on cyber, and then one I know that you've looked at and we've talked about, and that is the enablers provision that would include so-called gatekeepers that aren't currently required to deal with the requirements of the Bank Secrecy Act.

Elliot Berman: Yeah. And the important thing there, and again, you and I have talked about this in the past, is that some of that was actually driven by the Pandora papers about how gatekeepers have become the enablers and fact, even it's actually in the preamble to the actual legislation. They have become the enablers to help people move and hide assets.

And while some of those people are doing things that are perfectly legal. Many of them are not, and or it's a mixture of legal and illegal. And so there are, and I think we talked about this as well. There are a number of other countries, the UK being one of them, where lawyers and accountants and corporate service companies already have some obligations, maybe not the full regimen that we have in the United States of the Bank Secrecy Act, but they certainly have disclosure obligations, reporting, obligations, that kind of thing. And, you know, my own opinion is that it's important for people who are engaged in those kinds of activities to be responsible for their acts. And in particular, you know, as you and I are both lawyers, you know, it's one thing to vigorously represent a someone charged with a crime, right, in defending them. But I think it's another thing to be a facilitator or an enabler of people committing crimes or actively hiding the fruits of crime that strikes me as out of bounds. As you know, John would say, it's too bad that we actually have to have an act to require this stuff because it seems like doing the right thing is what you're supposed to do. But if we need an act, then let's go get one.

John Byrne: Yeah. You know, the reference point in the sort of the preamble to the coverage of gatekeepers includes, as you just said, references to the Pandora papers and FATF. And also, as we, I think we've talked about this, maybe even on this program is back in December last December, the US had a strategy on countering corruption. And so in that strategy, they talked specifically about the deficiencies in our framework, including what they're trying to cover here, professionals and service providers and lawyers, accountants.

You know, trust companies, service providers, and others that help enable the movement of illicit funds. So there's a lot of support, factual support for why this is being included. I think what's gonna be interesting is the way the amendment is currently structured. So it doesn't change the requirements for gatekeepers would be obviously decided by the Treasury Department through regulation and maybe obviously, but then, the requirements, once that's decided you're covered. What are gonna be the appropriate requirements? So they'll, so the regulation will say, obviously totally guessing here. It'll say, if you're a lawyer and you're involved in these certain transactions, you need to do this.

If you are a corporate service provider, you need to do that, that sort of thing. So, right, that's part of it. And then also, treasury is gonna have to identify people in these categories. So it's a lot to do if this is to happen. And it's gonna be interesting to see if there's any opposition to this on the Senate side cause right now, again, as we're recording, it looks pretty clear that this is gonna make it through the house.

Elliot Berman: Yeah. You know, that approach, you know, the legislation extending the umbrella, if you will, of the bank secrecy act to a new class of folks, and then, leaving it to the Senate, ultimately to write the regs.

That's what happened in the Patriot Act. That's how insurance providers that brought into the act. They were added to the list of organizations to be covered, but the actual detail, and that's why we ended up with some parts of the insurance industry being covered, you know, comprehensively and some not based on the Senate's determination through the process of where was the money laundering.

John Byrne: Right. And toward the end of the amendment, there's also a recognition that to make this effective, you're gonna have to work with states and localities. And there actually is a provision that says the treasury, and they always put this language in there to the extent, greatest extent practical will establish relationships with state, local, territorial, and tribal government agencies, to figure all this out. So I think, yeah, that's obviously a recognition that there's only so much you can do on the federal level. You're gonna need some state support because in many of these states, that's where the licensing requirements are, and that's the application process, you know, that sort of thing. So it's not gonna be easy to do. It'll probably take a while. Not withstanding the deadlines, but I agree with you that this should have been done quite a long time ago.

Elliot Berman: Indeed. So here's a chance for a shameless plug. What else do you have going on?

John Byrne: We have a couple of podcasts that we haven't posted yet.

One with a former federal reserve employee that now works for, CipherTrace, and he talks about crypto. That's coming up, and then a really interesting conversation with the new executive secretary of Wolfsburg. And so that'll get posted. I'm also working with the IRS to talk to some of their folks about some of the work that they're doing.

And then, you know, I have a couple of other potential folks to interview that I'm working on, but I'll save that for next.

Elliot Berman: Okay. And I'll throw one in if you look to our website, we posted a blog that I wrote that's not why you should read it. But it's about the new crypto framework that has been preliminarily agreed to in the European Union. That is being viewed as something that might be to

Crypto what GDPR is to privacy in terms of leading the way of a functional framework for managing the consumer protection aspect and the operating environment for crypto and asset service providers. So, worthwhile to see that. It won't become for probably another 18 months, but it's, what's coming, and it's certainly, I think, something we all should be aware of, even if we're not doing the active work in the EU.

John Byrne: Well, that sounds good. Elliot, stay safe. We will catch up again next week. Take care. 

Elliot Berman: Yeah, you be well too. Bye-bye.