Anti-money laundering (“AML”) issues have been a focus of regulators and law enforcement for the past decade and will likely continue to be a priority issue area for the Biden Administration. The AML landscape is shifting considerably as a series of regulatory actions in the last months of 2020 and the January 1, 2021 passage of the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”) — adopted with bipartisan support overriding President Trump’s veto—bring real change to the regulatory environment at the start of the new administration. Indeed, the NDAA is the most significant amendment to the AML landscape in a generation, since the adoption of the USA PATRIOT Act, and will require extensive implementation by the Treasury Department. The regulatory and legislative changes together have two principal themes: (i) a conscious effort to evolve AML compliance and the Bank Secrecy Act and its implementing regulations (collectively, the “BSA”) to make the system more efficient and effective; and (ii) adapting the BSA to a new generation of threats.
Although the NDAA may be perceived as a win for the industry, particularly to the extent it may lessen institutions’ burden with respect to obtaining beneficial ownership information, the law’s bipartisan support makes it likely that implementing agencies will move to implement it as intended (as indeed they are required by law to do), even with the expected appointment of new leadership at some of the implementing agencies. Further, the NDAA’s promise to facilitate the adaptation of advanced technology in BSA compliance and to help financial institutions focus AML resources on priorities identified by the government may also yield substantial dividends, though the devil will come in the details of implementation. It is worth noting that similar rulemakings, such as the Financial Crimes Enforcement Network’s (“FinCEN”) Customer Due Diligence Rule (“CDD Rule”), took years to be completed. It may therefore be some time before the industry sees benefits from the rulemaking, statutory deadlines for the rulemakings notwithstanding. Nevertheless, the industry should think through a strategy for proactively engaging with the government to inform those implementation efforts.
