2020 was an unforgettable year for many reasons; the Covid outbreak, the US national election, civil unrest, and just general mayhem.  It was also a significant year in the area of BSA/AML compliance.  In 2020 the US Congress passed the Anti-Money Laundering Act of 2020 (“AMLA”).  Among the significant provisions of this Act were:

• A statement from FinCEN on the priorities for AML/CFT
• Expansion of AML rules to dealers in arts and antiquities
• AML threat patterns will be shared more freely amongst law enforcement
• SAR sharing
• Corporate Transparency Act

• The last of these provisions, the Corporate Transparency Act, is the basis for new rules that will require almost all businesses to supply Uniform Beneficial Ownership information on a national registry. 

  Since 2020, there have been only slight changes in the rules and laws that apply to AML administration, however, that doesn’t mean that changes are not occurring in the administration of an AML compliance program.  

  Changes Are Coming-What’s in a Name?

  Among the changes that have been and are being implemented is a change in nomenclature.  The FDIC and other prudential regulators have announced that going forward:

  For purposes of consistency with the AML Act, the FDIC now uses the term “AML/CFT rather than “BSA/AML[1]

  The change in name is designed to emphasize an emphasis on countering the financing of terrorism.   There is also a clear indication that the emphasis will be on detecting potentially suspicious activity and managing it through strong internal controls.  

  Consistent with previous regulatory efforts, much of the focus of the AMLA 2020 is on facilitating information sharing between the public and private sectors in order to strengthen the AML system and better protect the financial system from abuse.[2]

  It is clear that there will be an emphasis on the ability of your AML/CFT program to identify the areas of risk in your product portfolio and to tie the risks that are identified to the monitoring program that is implemented.   There will be an emphasis on not just knowing who your customers are; but also, the characteristics of a typical transaction for your customer base.

  Advert

  Simplify BSA Risks

  

  Priorities

  Another impact of the passage of the AMLA is that FinCEN was required to publish its priorities each year.  FinCEN announced its priorities for the first time in June of 2021 and these priorities have been re-iterated since then.  FinCEN’s pronouncement is that the priorities are not listed in order of importance:

  1.  Corruption.

  2.  Cybercrime, including relevant cybersecurity and virtual currency considerations

  3. Foreign and domestic terrorist financing.

  4. Fraud.

  5. Transnational criminal organization activity.

  6. Drug trafficking organization activity.

  7. Human trafficking and human smuggling;

  8. Proliferation financing.

  Despite the fact that the agency says that there isn’t a priority the following areas have received the most attention from regulators:

  1. Beneficial ownership reporting:  a final rule has been issued that will require all businesses that have registered with a Secretary of State in any state in the United States to be registered.   There is a proposed final rule about who will have access to the registry that is being considered and will be finalized in 2023.
  2. Anti-Corruption/Real estate: FinCEN has issued orders that target high-value real estate markets and has expanded the requirements for a full AML compliance program to dealers in antiquities and luxury items.
  3. Priorities:  FinCEN is working on a rule that will make the above priorities part of the regulatory framework
  4. Virtual Currency: – There is no question that regulations that deal specifically with Virtual currency are coming
  5. Fraud:  Although fraud has been pervasive for many years, this area has grown and become an area of focus for regulatory attention.

  Change in Focus is the Same as Change in Regulation

   

  

  Even for institutions that are not directly impacted by these rules, remember that a change in focus can have the same effect as a change in regulation.  Areas of examination that in the past may have received little attention will now be a focal point of an examination.  Pay particular attention to the following areas: 

  1. Transaction Monitoring:  Make sure that your compliance team has the ability to identify typical and unusual patterns of activity based on your customer portfolio.
  2.  Risk rating and Risk Assessments:  Identifying the overall risks o the business as well as the risks associated with individual customers and tying the results of risk assessments to the overall monitoring program.
  3. Fraud Detection:  Ensuring that systems are in place to detect fraud.
  4. IT Security:  Be aware of the systems are in place to protect private non-public information
  5. SAR documentation:   Make sure that when suspicious activity is suspected, your compliance teams document the research that was performed, even if it does not result in a SAR.  Make sure that the reasons for not filing as SAR are documented in the same manner as the decision to file.

  ---

  [1] https://www.fdic.gov/resources/bankers/aml-cf