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The US Anti-Money Laundering Act significantly increases enforcement powers and geographical reach for US authorities. The act, also known as AMLA, means that authorities can request information from any bank that has a US correspondent relationship. The impact for non-US organisations could be significant so it’s important to understand the implications.
The new legislation has been met with mixed reviews since it came into force at the beginning of the year. On the one hand it can be seen as a powerful enforcement tool to assist cross-border investigations, and on the other hand as an opportunity for US authorities to embark on ‘fishing expeditions’.
AMLA for non-US organisations
There are three key areas from the act we would encourage non-US organisations to bear in mind.
Expansion of subpoena rights
The act expands the authorities’ right to issue subpoenas to any foreign bank that maintains a correspondent account in the US, irrespective of whether the foreign bank is the reason for the subpoena or subject of investigation.
The act also expands the scope of the subpoena to include “any account at the foreign bank, including records maintained outside of the United States” where those records relate to potential violations of US criminal laws, the Bank Secrecy Act, or a civil forfeiture action. Any foreign bank that fails to comply with the subpoena could face a civil penalty of $50,000 per day outstanding, as well as termination of their US correspondent relationship which, in some cases, could be fatal.
The global nature of relationships is likely to make responding to subpoenas particularly complicated and time consuming. The subject of a subpoena could be a beneficial owner, director, or key controller of many companies, across many jurisdictions with one bank. Where different systems are used in different jurisdictions and across different lines of business, the task of providing up to date, accurate information becomes even more challenging.
The act introduces a number of new penalties firms can expect if they do not comply with the requirements of the legislation. Specifically, it prohibits the knowing or wilful concealment of information (from or to another financial institution) pertaining to transactions of over $1 million, if any of the assets involved belong to a “senior foreign political figure, their close family members, or other close associates”.
Increased information sharing
In addition to increased information sharing at a domestic level, the act brings important changes to international information sharing related to suspicious activity reports (SARs) and money laundering risk. Historically, FinCEN has permitted the sharing of SAR information with non-US parent organisations, but the AMLA states that within a year of the act coming into force, a pilot will be introduced which will enable financial institutions to share SAR information with other branches, subsidiaries, and affiliates, even if these are outside the United States. It is likely that this provision was driven, at least in part, to address the issues raised by the FinCEN files leak and to re-establish the integrity of the suspicious activity reporting system.
The pilot will exclude such affiliates located in China and Russia, and other jurisdictions posing a sanctions, terrorism or security concern. It nevertheless goes some way to addressing existing information sharing challenges for international organisations and will aid holistic investigations into financial crime.
Over all, the impact of the act is yet to be assessed, and it is likely that more pros and cons will come to light as it is actively enforced.
One thing is for certain – it will take time and additional resource for financial institutions to navigate this new piece of legislation.
If you have any questions or want to discuss the US Anti-Money Laundering Act in more detail, please get in touch.