28 Jul 2021
The assault on the U.S. Capitol on Jan. 6 elevated the national security significance of domestic extremism, and U.S. anti-money laundering/countering the financing of terrorism (AML/CFT) policies are evolving accordingly. Recent Biden Administration actions make clear the government’s expectation that financial institutions will act as monitors of financial activity by extremists. These initiatives, combined with related Bank Secrecy Act (BSA) regulatory actions currently in progress, may add substantially to BSA compliance burdens by the end of the year.
U.S. AML/CFT Priorities
The international terrorist attacks of Sept. 11, 2001, transformed U.S. anti-money laundering regulation, created by the Bank Secrecy Act of 1970, into the extensive AML/CFT regulatory regime of today. Similarly, albeit far more quietly, the Jan. 6 attack on the U.S. Capitol has elevated domestic extremists as a priority for AML/CFT regulation and compliance.
The 2020 National Strategy for Combating Terrorist and Other Illicit Financing had already identified domestic terrorist activity as a rising threat and a distinct problem for efforts to counter terrorist financing. In 2021, domestic terrorism has become the subject of its own National Strategy for Countering Domestic Terrorism, issued by the White House and National Security Council June 15. Its strategic goals include the Treasury Department “enhancing engagement with financial institutions on domestic terrorist financing, including through existing provisions of the Bank Secrecy Act” (Strategic Goal 1.3).
The Financial Crimes Enforcement Network (FinCEN) issued its AML/CFT National Priorities June 30, as mandated by the Anti-Money Laundering Act of 2020 (AMLA). Those priorities, which discussed domestic terrorism and international terrorism equally, declared domestic terrorist financing to be a key priority for BSA regulation and compliance. The National Priorities referenced both the National Strategy issued 15 days earlier and, specifically, the threat of domestic violent extremists (DVEs).
AML/CFT Regulatory Actions in 2021
FinCEN regulatory actions mandated by the AMLA that are currently in progress will determine how the priority placed on domestic terrorism and DVEs will affect AML/CFT regulation and compliance.
One such action is that new rules will inform financial institutions how to incorporate the AML/CFT National Priorities into their risk-based BSA compliance programs. This rulemaking, required by the same Section 6101 of the AMLA that ordered the declaration of the priorities, must be completed within 180 days after the date of the announcement of the priorities.
The Corporate Transparency Act (CTA), enacted in Sections 6401–6403 of the AMLA, adds to the BSA a new 31 U.S.C. § 5336 that requires corporate entities to submit reports identifying their beneficial owners to FinCEN, which will maintain the information in a secure nonpublic database. FinCEN must promulgate regulations on beneficial ownership reporting procedures not later than one year after the enactment of the AMLA (which was on Jan. 1). Ensuring that these procedures will also enable capturing information on DVE ownership of corporate entities is likely to be a consideration in FinCEN’s rulemaking.
The customer due diligence (CDD) rules adopted by FinCEN in 2016 also may change, in accordance with the CTA and the AML/CFT National Priorities. The CDD rules require financial institutions to conduct due diligence into the beneficial owners of corporate entities. The CTA requires FinCEN to revise the CDD rules as necessary to conform them to the new beneficial ownership reporting rules, no later than one year after the adoption of those rules.
By Robert Kim, Bloomberg Law, 27 July 2021
Read more at Bloomberg Law
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