Substantial AML Reforms Enable Regulators to “Follow the Money”


On January 1, 2021, Congress enacted the National Defense Authorization Act for Fiscal Year 2021 (the “NDAA”), after overriding a presidential veto.  Within the NDAA is the Anti-Money Laundering Act of 2020 (the “AMLA”), which introduces substantial reforms to U.S. anti-money laundering (“AML”) and counter-terrorism financing (“CFT”) laws.  The AMLA demonstrates Congressional intent to combat money laundering and terrorist financing through expanding the Financial Crimes Enforcement Network’s (“FinCEN”) regulatory power.  Major legislative reforms include:

Notwithstanding these changes, the most significant reforms involve the new beneficial ownership rules, which provide law enforcement access to essential data for investigations.  Within the AMLA, Congress passed the Corporate Transparency Act (“CTA”) which:

New Beneficial Ownership Rules

The term “beneficial owner” applies to an individual who directly or indirectly (i) exercises “substantial control” over an entity, or (ii) owns or controls not less than 25 percent of an entity.  The meaning of “substantial control” is expected to be addressed in the FinCEN regulations.  The beneficial owner reporting requirements contain numerous exceptions including, but not limited to: certain publicly-traded companies or issuers, certain companies with a physical U.S. location with more than 20 full-time employees and $5 million in gross receipts or sales, charitable organizations, trusts, investment companies, and pooled investment vehicles.  Clearly, Congress intended to capture smaller corporations and shell companies that present the greatest money laundering risk. 

Reporting companies must provide to FinCEN each beneficial owner’s full name, date of birth, address, and unique identifying number from a valid passport, driver’s license, or other state-issued identification document.  Beneficial ownership information must be submitted within two years if the reporting company is formed or registered prior to the anticipated January 2022 regulations.  Reporting companies formed or registered after the publication of the anticipated regulations will have an immediate reporting obligation.

The AMLA represents the most substantial overhaul of AML laws since the 2001 Patriot Act.  The bipartisan message of Congress is clear:  regulators must crack-down on the use of shell-companies for money laundering and other financial crimes.  As such, the AMLA will make it significantly more difficult for individuals to facilitate their crimes and grants law enforcement and regulators greater tools to investigate illicit activity.


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National Law Review, Volume XI, Number 21