The ENABLERS Act: An Overview of AML Legislation for Professional Service Providers

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Following the Pandora Papers scandal, U.S. legislators reevaluated their approach to anti-money laundering (AML) regulations. The Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act was an effort to make AML regulations more effective and comprehensive by extending AML requirements to a wider range of industries and professions, including those often overlooked in the past.

 

This article provides an overview of the ENABLERS Act, its far-reaching implications for professional service providers, the potential burdens it imposes, and the possible future of similar AML legislation.

 

 

What is the ENABLERS Act?

The ENABLERS Act was initially introduced in October 2021 by a bipartisan group of lawmakers in response to the release of the Pandora Papers. The act aimed to close loopholes that allowed “enablers” to launder illicit funds in the U.S. by extending anti-money laundering (AML) requirements to professional service providers, including accountants, lawyers, and third-party payment services. This extension sought to hold these professionals accountable and encourage greater transparency.

 

The House of Representatives passed a revised version of the ENABLERS Act in July 2022, by which point it had been included in the National Defense Authorization Act. However, on December 7, 2022, the Senate voted against the act’s inclusion in the defense budget, ending its progress for the time being. Nevertheless, it is possible that similar legislation will be introduced in 2023 or the following years, reflecting ongoing concerns about financial crime.

 

For information on additional legislation, view our timeline of key BSA/AML Regulations.

 

 

Implications of the ENABLERS Act for Professional Service Providers

The ENABLERS Act initially targeted professional services providers who have the potential to facilitate money laundering and other illicit financial activities. The original act applied to the following types of companies and professionals, significantly broadening the scope of industries affected:

 

  • Attorneys, law firms, and notaries
  • Trusts and company service providers
  • Third-party payment service providers
  • Investment advisors
  • Sellers of art, antiques, and collectibles
  • Domestic title insurance companies
  • PR, marketing, and communications professionals
  • Certified Public Accountants (CPAs) and public accounting firms

 

A revised act reduced the types of professional service providers that were covered in an effort to balance regulatory burdens with effectiveness. It omitted, for example, arts and antiquities sellers. However, many professional services providers offering financial and legal services continued to be covered because of the critical role they play in financial planning.

 

 

Extending AML Requirements to Accountants, Lawyers, and Third-Party Payment Services

If the ENABLERS Act or similar legislation were to become law, impacted companies would be obligated to:

 

  • Establish Know Your Customer (KYC) procedures to discover and verify beneficial ownership structures of their clients
  • Implement procedures to guard against corruption, money laundering, terrorist financing, and other forms of illicit finance
  • Follow the guidelines for due diligence described in the Bank Secrecy Act (BSA)
  • Establish anti-money laundering programs to ensure compliance with legal requirements

 

The ENABLERS Act would impose stringent compliance measures on professional services companies, giving them obligations that previously applied only to money services companies like banks. They would be required to perform due diligence on their clients, maintain records, and report suspicious activities to the authorities to prevent money laundering and other illicit financial activities.

 

 

Opposition to the ENABLERS Act

There were many objections to the ENABLERS Act, but perhaps the most strident originated in the legal profession. The American Bar Association (ABA) argued that the amendment could require lawyers to report privileged information to government agencies, potentially compromising attorney-client confidentiality. 

 

Other professionals complained that their industry had no experience in anti-money laundering and would be unable to implement the required processes effectively, leading to increased costs and administrative burdens.

 

 

 

The Prospects for a Resurrected ENABLERS Act in 2023

Despite being blocked by the Senate, the ENABLERS Act could still be resubmitted as a standalone bill. The act received bipartisan support last year, which could increase its chances of being reintroduced for consideration by lawmakers.

 

If concerns about money laundering, financial crime, and corruption continue to be pressing issues, it is possible that the ENABLERS Act or similar legislation could be revisited in 2023, particularly if another incident like the Pandora Papers re-ignites public and media opposition to money laundering. Lawmakers will need to balance the need for effective AML measures with the potential burdens on the affected industries.

 

 

Conclusion

The ENABLERS Act represents a significant shift in the regulatory landscape for professional service providers. While the act aims to strengthen anti-money laundering measures, it would also burden professional services companies considerably, requiring them to navigate and comply with complex AML requirements. As a result, these companies will need to be prepared for the possibility of increased regulation in the coming years, and be ready to adapt their practices accordingly to minimize risk and maintain compliance.

 

Preparing for increased regulation from a resurrected ENABLERS Act, or other new legislation requires a robust yet adaptable compliance program. Alessa’s AML compliance software strengthens existing compliance programs while also allowing greater flexibility. Contact us today for a free demo of how our various compliance modules work together to increase your compliance program’s speed and accuracy.

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