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What is Anti-Money Laundering?

Anti-Money Laundering

What is Anti-Money Laundering? Anti-Money Laundering (AML) refers to a set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate money. It aims to detect and report any suspicious activity that may indicate money laundering so that authorities can investigate and take action. This typically includes measures such as customer due diligence, suspicious activity reporting, and record-keeping.

What is the History of Anti-Money Laundering?

Anti-Money Laundering (AML) regulations have evolved over time in response to changes in the financial industry and the methods used by money launderers.

The first AML laws were passed in the US in the 1970s, following the Watergate scandal and other high-profile cases of political corruption. The Bank Secrecy Act (BSA) of 1970 was the first federal law to target money laundering, and it required financial institutions to keep records of certain financial transactions and to report any suspicious activity to the government.

In the 1980s, the international community began to take notice of the problem of money laundering, and the Financial Action Task Force on Money Laundering (FATF) was established in 1989 to develop international standards for AML.

In the 1990s, the US passed several laws that expanded the scope of AML regulations, including the Money Laundering Control Act of 1986 and the Annunzio-Wylie Anti-Money Laundering Act of 1992. The 9/11 terrorist attacks also led to the introduction of the USA PATRIOT Act in 2001, which further strengthened AML regulations by requiring financial institutions to implement stricter customer identification and due diligence procedures.

In recent years, the focus of AML regulations has shifted to include new technologies such as cryptocurrency and to address issues such as terrorist financing and corruption. The trend is towards more robust regulations, especially with the implementation of the 4th and 5th EU AML Directive and the US FinCEN’s Customer Due Diligence rule.

What is the Anti-Money Laundering Act of 2020

The Anti-Money Laundering Act of 2020 (AMLA) is a law passed by the United States Congress that amends and strengthens the Bank Secrecy Act (BSA) and other anti-money laundering (AML) laws. The law was signed by President Donald Trump on January 1, 2020, and went into effect on January 1, 2021.

The AMLA includes several key provisions that aim to enhance the government’s ability to detect and prevent money laundering and other financial crimes. Some of the key provisions include:

  • Improving Transparency: One of the key provisions of the AMLA is to enhance the transparency of companies by requiring them to disclose the true owners of the company at the time of incorporation. This will make it more difficult for criminals to use shell companies to launder money and will help law enforcement agencies to trace and identify the true owners of the companies.
  • Strengthening Regulations for Virtual Currency: The AMLA also strengthens the AML regulations for virtual currency and precious metals dealers. This is important because virtual currencies and other digital assets have become increasingly popular, and they are often used by criminals to launder money. By requiring virtual currency and precious metals dealers to register with FinCEN and implement AML programs, the AMLA aims to make it more difficult for criminals to use these assets to launder money.
  • Enhancing Authorities of FinCEN: The AMLA also enhances the authorities of the Financial Crimes Enforcement Network (FinCEN) to supervise and examine financial institutions for compliance with AML laws. This will help FinCEN to better detect and prevent money laundering and other financial crimes.
  • Improving Customer Due Diligence: Another important provision of the AMLA is the requirement for financial institutions and other businesses to implement stronger customer due diligence (CDD) measures, including a requirement to identify and verify the beneficial owners of legal entity customers, and to conduct ongoing monitoring to detect and report suspicious activity. This will help to ensure that the U.S. financial system is not used to facilitate illegal activities.
  • Compliance with the international standard: The AMLA also aims to align US regulations with the international standard set by the Financial Action Task Force on Money Laundering (FATF), which is an intergovernmental organization that develops policies to combat money laundering and terrorist financing.

The AMLA requires financial institutions and other businesses to implement stronger customer due diligence (CDD) measures, including a requirement to identify and verify the beneficial owners of legal entity customers and aims to enhance the government’s ability to detect and prevent money laundering and other financial crimes, as well as to ensure that the U.S. financial system is not used to facilitate illegal activities.

Where to Get the Latest Updates on the Anti-Laundering Act?

There are several ways to stay informed and get updates on the Anti-Money Laundering Act (AMLA) and other anti-money laundering (AML) regulations:

  • Government agencies: The Financial Crimes Enforcement Network (FinCEN) and other government agencies such as the Department of Treasury, Federal Reserve, and Office of the Comptroller of the Currency (OCC) is responsible for enforcing AML regulations and issuing guidance on compliance. You can visit the websites of these agencies to get the latest updates and guidance on AML regulations.
  • Professional organizations: Professional organizations such as the American Bankers Association (ABA) and the Financial Industry Regulatory Authority (FINRA) often provide updates and guidance on AML regulations for their members.
  • Industry publications: Many industry publications, such as American Banker, Bankers’ Hotline, and Compliance Week, provide updates and analysis on AML regulations and their impact on the financial industry.
  • Conferences and seminars: Many organizations host conferences and seminars on AML regulations, where industry experts discuss the latest developments and best practices for compliance. Attending these events can be a great way to stay informed and get updates on AML regulations.
  • Consultants and legal firms: AML consulting firms and legal firms that specialize in AML can also provide updates and guidance on AML regulations.

The AMLA is still new and the regulatory agencies are in the process of releasing more guidance and clarifying some of the new provisions. Therefore, it’s important to keep an eye on the regulatory agencies’ websites and on industry publications.