Update of the anti-money laundering law: one year on

The National Defense Authorization Act for Fiscal Year 2021 came into effect in early 2021, after Congress overturned then President Trump’s veto. Division F of the NDAA consists of the Money Laundering Act of 2020 (“AMLA”). AMLA expands many Bank Secrecy Act (“BSA”) requirements, and FinCEN has continued to publish guidance, reports and regulatory proposals since our previous blog post summarizing developments in the first six months following the adoption of AMLA. The following is a summary of additional AML developments that have occurred in the second half of 2021.

Arts and Antiques

FinCEN announced in September a Regulatory Proposal Advance Notice (ANPRM) to solicit public comment on issues relating to the implementation of the AMLA changes relating to the antiques trade. The LBA amended the BSA by adding to the BSA’s definition of “financial institution” a person engaged in the antique trade.

The ANPRM notes that money launderers and terrorist financiers can exploit certain characteristics of the antiques trade to escape detection by law enforcement. These characteristics include client confidentiality, the challenges of accurately documenting provenance, the use of intermediaries, and the subjectivity of antiques prices. The ANPRM asked many questions, including:

  • Seek out descriptions of the roles, responsibilities and activities of those involved in the antiques trade
  • How Transactions Related to the Antiques Trade Are Generally Funded and Facilitated
  • The type of information a buyer typically learns about a seller, co-signer, or intermediary in the sale of antiques
  • What parts of the market are most vulnerable to money laundering and terrorist financing risks, and the geographic locations where these vulnerabilities tend to occur
  • How “antiques” and “antiques trade” should be defined for the purposes of FinCEN regulation
  • What should be the requirements for filing antiques-related suspicious activity reports

FinCEN required written comments to be submitted by October 25, 2021, and it publicly shared 37 comments from various parties, including auction houses, coin collectors, non-governmental organizations and associations. professional.

Sharing information on threat patterns and trends

Section 6206 of the AMLA amended the BSA to require FinCEN to publish, at least once a year, information on trends and trends in threats in order to provide “meaningful information on the preparation, use and the value ”of suspicious activity reports (“ SARs ”) filed by financial institutions as well as other reports filed by financial institutions under the BSA. These publications should include typologies relating to new patterns and trends in money laundering and terrorist financing threats.

In October, FinCEN released a Financial Trend Analysis on ransomware trends in BSA data between January 2021 and June 2021. The publication reflects an increase in the number and severity of ransomware attacks against critical US infrastructure since late late. 2020, and growth in SAR-related ransomware. The analysis predicted that, if current trends continue, SARs filed in 2021 are expected to have a higher ransomware-related transaction value than SARs filed in the previous 10 years combined. During the review period, US-based digital forensic incident response companies filed the majority of ransomware-related SARs.[1] The analysis identified six typologies of ransomware-related money laundering, including increased use of mixing services, which are websites or software designed to conceal or obscure the source or owner of convertible virtual currency. The analysis concludes with detection and mitigation recommendations, such as incorporating indicators of compromise from threat data sources into intrusion detection systems and security alert systems.[2]

FinCEN then published in December a Financial Threat Analysis on the threat of illicit financing involving wildlife trafficking. The analysis concluded that although the number of SARs associated with wildlife trafficking has increased, SARs likely capture only a small percentage of all illicit financial activities associated with wildlife trafficking. According to FinCEN, “[d]the differentiation between legal and illegal wildlife trade (both domestic and international) generally cannot be achieved by financial analysis alone and may be at least one of the reasons for this discrepancy. SARs referred to some of the world’s most heavily trafficked wildlife and associated parts of wildlife, including ivory, rhinos, elephants, and reptiles. FinCEN has identified several activity indicators related to wildlife trafficking, including transactions referring to wildlife care or equipment and transactions involving entities associated with wildlife (such as private zoos). .

Review of regulations and guidelines

Section 6216 of the AMLA requires the Secretary of the Treasury, along with other entities, to undertake a formal review of BSA implementing regulations and BSA guidelines. One of the objectives of Article 6216 is to identify regulations and guidelines which may be outdated, redundant or which do not promote a risk-based anti-money laundering and terrorist financing regime. financial institutions. In December, FinCEN issued an Information Request for comments on ways to “streamline, modernize and update” the US AML / CFT regime. Comments should be submitted to FinCEN by February 14, 2022. FinCEN will report to Congress on the findings of the review, including administrative and legislative recommendations.

Business transparency law

The LBA includes the Business Transparency Act (“CTA”). In December, FinCEN published a notice of regulatory proposal on the proposed rule to implement beneficial ownership of CTA

provisions relating to the provision of information. The proposed regulations describe who must file a report, what information must be provided and when a report is due.

The CTA requires a reporting company to identify any person who (a) exercises substantial control over the entity, or (b) owns or controls at least 25% of the entity’s interests. The rule proposed by FinCEN seeks to clarify the terms “substantial control” and “property interests”. The proposed regulation sets out three specific indicators of substantial control: (1) service as a senior manager, (2) authority over the appointment or dismissal of any senior manager or the dominant majority of the board of directors (or of a similar body), or (3) direction, determination or decision of, or substantial influence on, material matters of a reporting company. Under the proposed rule, “property interest” would include both equity in the company and other types of interest, such as principal or interest on profit. In addition to information on beneficial owners, the CTA also requires reporting companies to provide information on “applicants”. For national reporting companies, the rule proposed by FinCEN defines a candidate company as the natural person who files the document that forms the entity. For foreign reporting companies, a business applicant is the person who files the document that first registers the entity to do business in the United States. The proposed definition of “filing company” also includes “any individual who directs or controls the filing of such a document by another person”.

The comment period for the proposed regulatory notice is open until February 7, 2022. FinCEN will engage in additional regulations relating to the CTA, including establishing rules on who can access beneficial ownership information and by revising the rule of vigilance with regard to FinCEN customers.

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