The U.S. Anti-Money Laundering Act of 2020 (AML Act) became law on January 1 when the United States Congress passed the broader National Defense Authorization Act for 2021 over a presidential veto. Although it is a U.S. law, it is critical that non-U.S. financial institutions, particularly those that rely on U.S. correspondent banking relationships or transact in U.S. dollars, understand how the AML Act will impact them—both directly and by shaping U.S. actors’ expectations for their foreign partners. In general, the AML Act aims to improve coordination and information sharing; to modernize the U.S. anti-money laundering/combating the financing of terrorism (AML/CFT) regime; to encourage adoption of new compliance technologies; to reinforce the risk-based approach; and to create beneficial ownership reporting requirements to prevent illicit activity and protect U.S. national security.
In the near-term, the AML Act will subject non-U.S. financial institutions to new requirements while presenting them with new opportunities for engagement with U.S. authorities and banks:
Other sections of the AML Act create potential longer-term impacts on non-U.S. financial institutions and demonstrate how the United States is addressing challenges that it shares with many other jurisdictions. These sections of the law also highlight areas where changing requirements for U.S. financial institutions may translate into heightened expectations for foreign partners, and other areas where U.S. authorities and banks are now more likely to seek complementary reforms from their foreign counterparts.
1 Section 6308, Anti-Money Laundering Act of 2020 [AML Act], Division F of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, https://www.congress.gov/bill/116th-congress/house-bill/6395/text.
2 The subpoena may be served (1) in person; (2) by mail or fax in the United States if the foreign bank has a representative in the United States; or (3) if applicable, in a foreign country under an mutual legal assistance treaty, multilateral agreement, or other request for international legal or law enforcement assistance.
3 Records within scope of this authority are those that are the subject of (1) any investigation of a violation of U.S. criminal law; (2) any investigation of a violation of 31 U.S. Code Subchapter II – Records and Reports on Monetary Instruments Transactions; (3) a civil forfeiture action; or (4) an investigation pursuant to section 5318A of the subchapter. They include those records maintained outside of the United States.
4 Section 6313, AML Act.
5 Specifically, the prohibition applies if the transaction also violates the prohibitions or conditions prescribed under section 5318A(b)(5) or regulations promulgated under title 31 of U.S. Code.
6 Section 6212, AML Act.
7 Sections 6106 and 6108, AML Act.
8 Section 6403, AML Act.
9 For instance, companies such as highly regulated institutions—including financial institutions and utilities—nonprofit organizations, inactive companies, and companies with at least 20 employees and $5 million in revenue are exempt from the reporting requirement.
10 See, for instance, Ann Marlowe, “Time for a Free Public Registry of Corporate Beneficial Ownership in the U.S.,” Organized Crime and Corruption Reporting Project, Jan. 26, 2021, https://www.occrp.org/en/37-ccblog/ccblog/13722-opinion-time-for-a-free-public-registry-of-corporate-beneficial-ownership-in-the-u-s and Amy Mackinnon, “The U.S. Is a Haven for Money Laundering. That Might Be About to Change,” Foreign Policy, Jul. 31, 2020, https://foreignpolicy.com/2020/07/31/us-money-laundering-shell-company-new-law/.
11 Sections 6202 through 6205, AML Act.
12 Sections 6206 and 6209, AML Act.