The US Congress is expected this week to approve the first overhaul of the country’s anti-money laundering laws in decades, a change supported by politicians of both parties, bank regulators and banks themselves.
Under the new legislation, all US corporations will have to register the identity of their beneficial owners in a database operated by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), in order to prevent criminals from using shell companies to conceal ill-gotten gains.
Previously, identifying beneficial owners was the responsibility of banks when corporations applied for bank accounts.
“This is the most significant piece of AML legislation since the Patriot Act 20 years ago,” said Daniel Stipano, a partner at the law firm Buckley LLP, who has worked on AML law for 30 years as a regulator and lawyer. “It helps bring the whole regime into the 21st century.”
Under the law, banks will no longer act as information-collecting middle men between companies and law enforcement, lowering their cost of compliance.
“In the post 9/11 world, and especially since the financial crisis, what you have seen is regulators making the US banking system the world’s de facto AML regulatory body,” said Ed Mills, policy analyst at Raymond James. As a result, “when someone comes to do business, the bank has to become a sleuth . . . This bill shifts the burden to the customer to self-disclose.”
The bill also requires that the Treasury set priorities for AML policy among law enforcement, bank supervisors, and banks, and establish channels of communication between the three groups. The aim is to make the current system — under which set types or patterns of transaction automatically trigger alerts that banks must then notify to the Treasury in “suspicious activity reports” — more streamlined and flexible.
Greg Baer, chief executive of the Bank Policy Institute, a bank lobby group, said the law “allows banks to focus on the most dangerous offenders, at the direction of the Treasury”.
Dennis Kelleher, president of Better Markets, a non-profit that is often critical of the banking industry, noted the bill was “supported by many across the entire ideological spectrum — the bottom line is that finally requiring transparency of actual owners hiding behind beneficial ownership disguises is a win-win for everyone”, except for criminals.
The legislation, the Anti Money-Laundering Act of 2020, has been bolted into the annual defence budget authorisation bill. That bill was passed by the House of Representatives on Tuesday and is expected to pass the Senate on Wednesday, although President Donald Trump has threatened to veto it because it does not include other measures he wants.
The president wants the bill to include the repeal of section 230 of the Communications Decency Act, which protects social networks from libel prosecution. “If the very dangerous & unfair Section 230 is not completely terminated . . . I will be forced to unequivocally VETO the Bill,” the president wrote on Twitter last week. On Monday, he added “troop reductions in foreign lands” to his list of demands.
Members of Congress from both parties have indicated that they are prepared to vote to override a presidential veto.
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