A Timeline of Key BSA/AML Regulations
Over half a century has passed since the enactment of the Bank Secrecy Act (BSA), the first piece of U.S. legislation aimed at combating money laundering. The ensuing decades have seen several amendments to the BSA, most notably the USA PATRIOT Act of 2001.
In the meantime, the nature of money laundering, as well as the financial system, have continued to evolve considerably. With the emergence of new technologies and advancements in financial services also came novel opportunities for financial crime. As a result, the AML landscape looks drastically different today than it did just a few years ago.
The latest piece of legislation to address money laundering and terrorist financing threats is the recently passed AML Act. The AML Act is poised to usher in the most significant changes to the BSA since the USA PATRIOT Act by addressing longtime concerns of both the public and private sectors. To better understand the forthcoming changes that the AML Act is expected to bring to the existing BSA framework, below is a timeline overview of key U.S. money laundering measures, including a review of the AML Act.
The timeline concludes with a brief summary of the proposed ENABLERS Act, which, if enacted, will also close major loopholes in the current AML regime by imposing AML obligations on certain U.S. professional “gatekeepers.”
Timeline of Key BSA/AML Regulations
- The first piece of anti-money laundering legislation was passed in 1970, when Congress enacted the Currency and Foreign Transactions Reporting Act, also known as the Bank Secrecy Act (BSA). The BSA introduced specific record-keeping and reporting obligations for U.S. banks. These reporting and record keeping requirements were extended to a host of other financial institutions through various subsequent amendments to the BSA.
- 1986 saw the passage of the Money Laundering Control Act, which established money laundering as a federal crime.
- The Financial Crimes Enforcement Agency (FinCEN) was created in 1990 to “support federal, state, local and international law enforcement by analyzing the information required under the BSA.” FinCEN is the designated administrator of the BSA.
- In 1992, the Annunzio-Wylie Anti-Money Laundering Act was passed, strengthening the sanctions for BSA violations. It also provided a safe harbor for financial institutions and their employees from civil liability for reporting known or suspected criminal offenses or suspicious activity.
- The Money Laundering Suppression Act was passed in 1994. It required banking agencies to review and enhance training and develop AML exam procedures.
- In 1998, the Money Laundering and Financial Crimes Strategy Act required the Department of the Treasury and other agencies to develop a national money laundering financial crimes strategy.
- The September 11, 2001, terror attacks spurred the U.S. government to take prompt action to detect and prevent the financing of terrorism. Just a few months later, the USA PATRIOT Act was passed, strengthening and expanding the reporting and record-keeping mandate of the BSA, and the requirement for financial institutions to implement AML compliance programs, with appropriate internal policies, controls, and procedures.
- FinCEN’s CDD Rule went into effect in 2018, requiring covered financial institutions to identify and verify beneficial owners of their legal entity customers.
- The most recent and significant development in AML/CFT legislation in the US was the passage of the Anti-Money Laundering Act 2020 (AMLA), enacted on January 1, 2021 as part of the annual defense bill. The AMLA strengthens and modernizes the BSA by addressing the money laundering threats posed by shell companies and emerging technologies such as cryptocurrencies.
- Within it, the AMLA also contains the Corporate Transparency Act (CTA). The CTA requires certain corporations and limited liability companies (reporting companies) to disclose beneficial owner information to FinCEN and update ownership information within one year of any changes. It also directs FinCEN to create a non-public registry tracking the beneficial owners of reporting companies, which may be shared with law enforcement and financial institutions conducting due diligence under certain circumstances.
- More specifically, the purpose of the AMLA is to:
- establish a uniform beneficial ownership information reporting regime that includes reporting requirements for certain U.S. corporations and limited liability companies;
- codify the risk-based approach to AML/CFT compliance;
- modernize AML/CFT systems;
- greatly expand enforcement and investigation-related authority including an expansion of the duties, powers, and functions of the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and the authority of U.S. courts to subpoena foreign banks that maintain correspondent accounts with U.S. banks; and
- align supervision and examination priorities by emphasizing coordination, cooperation, and information-sharing among financial institutions, U.S. financial regulators and foreign financial regulators.
- The AMLA is expected to bring the U.S. more in line with a global regime of fighting financial crimes, as opposed to the current U.S.-centric framework.
- Proposed ENABLERS Act
- The bipartisan Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act targets industries at the center of massive corruption and money laundering scandals.
- Originally including seven new types of businesses and individuals within the BSA’s definition of financial institution (trust and company service providers, lawyers, art and antiques dealers, investment advisors, certified public accountants, and third party payment services, including payment processors, check consolidators, and cash vault service providers).
- Not all of those groups are likely to make it in the final version of the Act, as there remains considerable lobbying behind the scenes in Congress.
The impact of the AML Act remains to be seen. Nonetheless, financial institutions should seek to prepare their stakeholders, including boards of directors, foreign affiliates, and BSA/AML compliance personnel, by informing them of these changes and how they may impact their day-to-day operations.
BSA/AML regulations are constantly being added and changed making compliance a difficult process. Alessa can help you comply with regulatory requirements to ensure your compliance program is both robust and adaptable.