THE NEW ANTI-MONEY LAUNDERING ACT 2020 AND POTENTIAL EFFECTS ON FOREIGN BUSINESS

INTRODUCTION

On January 2, 2021, the National Defense Authorization Act (NDAA) became law. Significantly, the NDAA has included sweeping legal reforms in anti-money laundering laws (AML), now incorporated into the Anti-Money Laundering Act 2020 (“AMLA”) (NDAA 6001-6511). Designed to promote national security concerns, these AML amendments will have a significant impact on financial institutions, certain types of businesses - domestic and foreign, and High Net worth Individuals (“HNWIs”). While HNWIs officially seek to maintain confidentiality in their organizations or wealth management structures, AMLA will make that more difficult and riskier.

KEY POINTS

1.    BENEFICIAL OWNERSHIP REPORTING

In an effort to prevent money launderers and other bad actors from investing in American companies, AMLA now requires certain "reporting companies" to disclose details of beneficial ownership to Finsen. The definition of "profitable owner" includes any person who owns or controls 25% or more of the business or who controls the business. However, many companies are exempt from these reporting requirements including, publicly traded companies, corporate banks, and companies in the United States with more than 20 employees and more than $ 5million in revenue in the US. The main purpose of this new patent reporting requirement is to prevent the anonymity of the owners of corporate profits designed to collect illegal funds while releasing companies that may not be involved in this type of scheme. Reporting companies have 2 years to submit their ownership information to Finsen if those companies were created or registered prior to the enactment of these laws, and reporting companies built after the rules will be responsible for immediate reporting. In addition to corporate visibility, AMLA encourages the sharing of information between financial institutions and investigative entities and specifically authorizes Finsen to disclose information to foreign governments for use in investigations and procedures.

2.    INCREASED PRESSURE TO COMPLY WITH CROSS-BORDER INVESTIGATIONS: 

AMLA increases fines in foreign institutions by increasing the penalties that can be levied when a foreign bank fails to comply with a summons, or discloses a summons, directly or indirectly, to the account holder. In addition, the AMLA provides that "assertion that compliance with the summons would be contrary to the provision of foreign privacy or confidentiality law will not be the sole basis for eliminating or altering the recommendations."

3.    EXPANDED POWER OF SUBPOENA:  

AMLA also extends the government's authority to lodge a complaint with foreign banks. While the DOJ or Treasurer may previously issue a court summons to any foreign bank that maintains a "communication account" in the US to obtain "records relating to that account," the government is now authorized to request records relating to corresponding accounts "or other. “Foreign bank account” is the subject of a BSA / anti-money investigation, foreclosure, or any criminal investigation. The purpose of this extension is to allow government investigators to access foreign bank records easily without relying on international agreements.

4.    SUSPICIOUS ACTIVITY REPORT (SAR) SHARING:

In the hope of improving suspicious job reporting, AMLA seeks to simplify the fulfillment of SARs by raising financial limits where financial institutions must keep certain types of records, while also reducing risk factors in certain types of transactions, including those involving aid agencies and embassies.

5.    ADVANCED PUBLISHER PROGRAM:

AMLA is developing an improved whistleblower system that will give people a 30% reward for any final fine of more than $ 1 million if they provide law enforcement with "original" information regarding violations of the Bank Secrecy Act. The AMLA also provides publishers with important protections against sexual harassment. These kinds of incentives provided them with information - and more importantly, the lawyers who brought these kinds of cases - almost always led to increasing law enforcement.

CONCLUSION

As a result of this new provision, foreign companies and High Net Worth individuals (HNWIs) operating a business in the United States will need to understand how these changes could affect their operations. Specifically, companies and HNWIs and their advisers need to familiarize themselves with these new rules to ensure that their investment in the United States is in line with these new requirements.

Author:

Damini Nagar
Indore
B.A LLB from Indore institution of Law