Several critical – but often overlooked – provisions of the 2021 National Defense Authorization Act (the “NDAA”) will begin to take shape in the coming months. Aside from allocating the annual defense budget, this year’s NDAA contained the Anti-Money Laundering Act of 2020 (“AMLA”), the Corporate Transparency Act (“CTA”), the Combatting Russian Money Laundering Act (“CRMLA”) and the Kleptocracy Asset Recovery Rewards Act (“KARRA”).
By these Acts, Congress sought to modernize the U.S.’ anti-money laundering and counterterrorist finance laws. The sweeping reforms address new and emerging threats, improve coordination and information sharing among regulators and law enforcement, and encourage technological innovation to more effectively counter money laundering and terrorism financing. Among other key changes, the legislation imposes new beneficial ownership reporting requirements, expands the authority of the Treasury and Justice Departments to subpoena records from foreign banks with U.S. correspondent accounts, and establishes a more robust whistleblower program to address money laundering.
In April, the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued an advanced notice of proposed rulemaking regarding the beneficial ownership reporting requirements of the CTA. The CTA requires “reporting companies” to submit a report to FinCEN identifying each of their “beneficial owners” and “applicants” by full legal name, date of birth, current residential or business street address, and a unique identifying number from an acceptable identification document or the individual’s FinCEN identifier. Reporting companies include corporations, LLCs, and “any other similar entity” created under the laws of a state, or formed under the law of a foreign country and registered to do business in the U.S. The CTA defines a beneficial owner as an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, owns or controls 25% or more of the ownership interests of the entity or exercises “substantial control” over the entity. An applicant is an individual who files an application to form or register a reporting company.
The Biden administration has requested $191M for FinCEN in its 2022 federal budget, $64M above the 2021 level, to fund the creation of the beneficial owner database. On another front, the administration will determine the fate of anti-money laundering rules proposed during the final months of the Trump administration. Among these rules is one jointly proposed by FinCEN and the Federal Reserve Bank which would lower the threshold at which international fund transfers must be reported, from $3,000 to $250. A second rule would impose new reporting, recordkeeping, and verification requirements on banks and money services business for certain virtual currency transactions.
If you would like more information regarding how the new anti-money laundering rules might affect your business, or alter your obligations as a business owner, contact the attorneys at Rock Fusco & Connelly, LLC.