One thing all BSA compliance professionals can agree on is that the requirements to identify money laundering and terrorist financing will continue to get more complex globally as time goes on. The good news is the 2021 National Defense Authorization Act (NDAA) updates aim to improve Bank Secrecy Act (BSA) compliance to make identifying money laundering and terrorist financing easier for everyone.
On January 1, 2021, the NDAA became law and brought some significant reforms to the BSA and other Anti-Money Laundering (AML) laws (over 200 pages of changes!). Let’s take a look at the most significant changes we can expect as these updates are implemented:
If an individual owns 25% of the entity or exercises substantial control over the entity, financial institutions will be required to provide name, date of birth, address, and unique identifying numbers (e.g., driver’s license or passport numbers) of their beneficial owners. Newly developed companies will be required to report such information at the time of incorporation. Reporting companies that subsequently experience a change in beneficial ownership will be required to provide FinCEN updated information within a year. FinCEN will maintain a registry of the beneficial ownership information collected.
To motivate reporting of BSA/AML violations, the NDAA set forth a new whistleblower program providing incentives to whistleblowers whose tips lead to monetary penalties exceeding $1 million. In these circumstances, whistleblowers can receive up to 30% of the monetary penalties assessed against the company. The NDAA also expanded the current whistleblower incentive law under the BSA, providing rewards of $150,000 or 25% of the penalty – whichever is lower – and created a private right of action for whistleblowers who suffer retaliation for disclosing BSA violations.
The NDAA includes several changes making it clear that cryptocurrency and other digital assets are within the scope of the regulatory requirements of the BSA. For example, the NDAA amends the BSA in several provisions to clarify the BSA may apply to “value that substitutes for currency.” The NDAA also amends the definition of “monetary instrument” to include “value that substitutes for any monetary instrument.” The amendments contained in the NDAA appear intended, at least in part, to resolve any doubts regarding Congress’s delegation of authority to regulate this space under the BSA.
Section 6101 of the NDAA amends the BSA (31 USC 5318) to require persons responsible for establishing, maintaining, and implementing a US financial institution’s AML compliance program to be “persons in the United States who are accessible to, and subject to, oversight and supervision by the Secretary of the Treasury and the appropriate Federal functional regulator.”
Section 6212 of the NDAA creates a pilot program for sharing Suspicious Activity Reports (SARs) and certain related information with foreign branches, subsidiaries, and affiliates of certain regulated financial institutions. The Act directs the Secretary of the Treasury to issue rules for the pilot program within one year of enactment. The pilot program will specifically exclude certain jurisdictions, including China, Russia, and other jurisdictions determined to be state sponsors of terrorism, subject to US sanctions, or that the Secretary believes “cannot reasonably protect the security and confidentiality” of shared information.
This certainly isn’t a comprehensive overview of the NDAAs BSA changes, but key takeaways to note. Please refer to the full document for more information.
If you are using software tools in your BSA compliance process, you’ll want to keep your device plugged in when these changes become mandatory and understand how your provider will integrate them into their product.
At the end of the day, we all have the same goal – to eliminate money laundering and terrorist financing. By working together and utilizing a comprehensive playbook along with these important NDAA BSA updates, we are one step closer to achieving this goal.
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