US Anti-Money Laundering Act 2020 (AMLA): an overview

The US Anti Money Laundering Act 2020 AMLA passed in Congress on January 1st 2021. As part of the National Defense Authorization Act (NDAA), it places more power with the United States government. This applies to data rights and whistleblower protection. The Act also authorized issuing harsher penalties to an individual or financial institution found to be involved in money laundering.

History of US Money Laundering Regulation

The AMLA is the first update to money laundering regulations since the USA Patriot Act of 2001. Financial institutions and the government alike have welcomed these long-overdue amendments as they strive to tackle money laundering activities relating to new technologies.

Over recent years, it has become clear that current regulations around money laundering were not as clear and deterring as hoped. Therefore, implementation of the AMLA aims to increase transparency for transactions and fintech leaders, with the overall goal being to reduce financial crime.

Moreover, the AMLA will introduce harsher penalties for individuals and financial institutions involved in malpractice. It is hoped that this new regulation will be more effective in deterring financial corruption and the criminals that facilitate it.

Key provisions of the US Anti-Money Laundering Act

There are three key provisions of AMLA:

1. Disclosure of beneficial ownership information
2. Increased whistleblower protection
3. Harsher penalties

Disclosure of Beneficial Ownership Information

This AMLA was set up in order to prevent the misuse of shell companies. By collecting information about the ownership of financial firms, the government can create their own private database.

The regulation states that smaller financial institutions (with less than 20 members of staff) must register the details of their beneficial owner with the Financial Crimes Enforcement Network (FCEN).

This reporting requirement exists to better financial intelligence investigations by the Financial Action Task Force (FATF). Those who fail to comply risk a $10,000 fine or $500 per day penalties.

Increase whistleblower protection

Historically, whistleblowers have been able to receive a level of compensation for their information disclosure. But the AMLA dictates a narrower field of discretion for payment, which should create a higher level of credibility for whistleblowers.

Moreover, whistleblowers will experience a better level of protection, through increased confidentiality. Alongside anonymising the nature of a whistleblower’s identity, their employers will be subject to law enforcement rules to protect them from:

• dismissals
• demotions
• threats

Finally, the amount of compensation that whistleblowers are eligible to receive has changed. Previously, the cap was $150,000 or 25% of the total fines collected by the government. Now, this has been increased to 30% of the total, meaning that a $1million fine results in $300,000 to the whistleblower.

Harsher penalties

One of the problems that the AMLA aims to tackle is the concealing of information. Therefore, those who knowingly conceal records from financial institutions relating to transactions above $1million will now face tougher penalties.

In particular, this applies to transactions relating to “politically exposed persons” and their relatives, or those who are involved in money laundering activities. New penalties include up to 10 years in prison and a $1million fine.

Who must comply with AMLA?

Compliance to the Anti Money Laundering Act 2020 applies to financial services firms, banks and other financial institutions. It also applies to any foreign bank, foreign financial institution or individual that is conducting business within the US or with US parties. It aligns with the EU’s regulation: 5AMLD.

In conjunction with the Bank Secrecy Act (BSA), financial institutions must follow the BSA reporting requirements. This integration between the AMLA and BSA is particularly important to protect against terrorist financing and general financial criminal activity. Therefore, failure to comply with the Anti Money Laundering Law results in a BSA violation.

From AMLA to the CCPA, CUBE understands financial regulation for US firms and provides automated regulatory intelligence – so you know what your regulatory obligations are now, and for the future.