BSA/AML - Not Even the Same Name!
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 form 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 potential
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 know who your customers are; but
also, the characteristics of a typical transaction for your customer base.
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 business 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 questions 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 upon 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 the 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, that your compliance teams documents 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.
Expanding the reach of AML
regulations
On February 16, 2024, the Financial Crimes
Enforcement Network (FinCEN) issued a notice of proposed rulemaking, which
would require certain real estate professionals to report certain transaction
information to FinCEN in connection with non-financed transfers of residential
real estate to legal entities or trusts
On February 13, 2024 FinCen also issued a
notice of proposed rulemaking. The
proposed rule would subject advisers to suspicious activity reporting
obligations similar to those required of broker-dealers. An adviser must report
suspicious transactions that are conducted or attempted by, at, or through an
adviser and involve or aggregate at least $5,000 in funds or other assets
We will discuss several of the changes
caused by the new priorities in our blogs this month.
***James
DeFrantz is the Principal at Virtual Compliance Management services. He can be reached at JDeFrantz@VCM4YOU.com***
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