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Horizon Scanner Financial Crime – US RISK RATING Horizon scanner RISK RATING Financial Crime – US Potential impact Legal issue/risk When? What’s next Supporting information The Anti-Money Laundering Act of 2020 Current The AML Act’s expansion of the National Defense strengthened the US government’s ability to seek subpoena power strengthens Authorization Act foreign bank records. the US government’s ability to for Fiscal Year conduct investigations 2021; H.R. 6395 On 1 January 2021, the US Congress overrode former involving foreign banks and to (116th) President Trump’s veto of the Anti-Money Laundering Act pursue enforcement actions, as of 2020 (AML Act) contained in the National Defense it will now have an easier path Congress passes Authorization Act for Fiscal Year 2021. The AML Act to access and use documents the Anti-Money permits the US Department of Treasury and US that previously were difficult to Laundering Act of Department of Justice to issue a subpoena for records to obtain. 2020, amending any foreign bank that maintains a correspondent account and modernizing in the United States. This new subpoena power is not the Bank Secrecy limited to records related to the correspondent account, Act which is the limitation that existed previously. Rather, it permits the US government to request records related to any account at the foreign bank, including records maintained outside of the United States. The AML Act prohibits US courts from quashing or modifying a subpoena on the sole ground that a financial institution’s compliance with the subpoena would conflict with foreign bank secrecy or confidentiality laws. The US Congress enacted the Corporate Current While financial institutions National Defense Transparency Act, which created an ultimate mostly are exempt from the Authorization Act beneficial ownership register. beneficial owner reporting for Fiscal Year requirement, they should 2021; H.R. 6395 On 1 January 2021, the US Congress overrode former consider restructuring their (116th) President Trump’s veto of the Corporate Transparency Act policies, procedures, and (which is part of the National Defense Authorization Act controls to incorporate checks Congress passes for Fiscal Year 2021). The Corporate Transparency Act against the contemplated the Anti-Money requires corporations, limited liability companies, and ultimate beneficial ownership Laundering Act of similar entities to file reports with and keep current database. 2020, amending information about their beneficial ownership with the US and modernizing Department of Treasury’s Financial Crimes Enforcement the Bank Secrecy Network (FinCEN). These reports must include the full Act name, date of birth, residential or business address, and information from an identification document or FinCEN identifier number for the beneficial owner(s). FinCEN will Immediate impact Short-term impact On the horizon 2 maintain this information in a non-public beneficial ownership database and can disclose information to financial institutions with the reporting company’s consent. Notably, many financial institutions, including registered issuers, federal and state credit unions, broker dealers, and qualifying larger companies are exempt from this reporting requirement, which is directed at smaller business and shell companies. The US Congress expanded the US Securities and Current The impact of the NDAA’s National Defense Exchange Commission’s disgorgement authority. disgorgement authorization is Authorization Act unclear. However, irrespective for Fiscal Year Previously, the Securities and Exchange Act of 1934 did of how courts treat 2021; H.R. 6395 not explicitly authorize the US Securities and Exchange disgorgement, the SEC now (116th) Commission (SEC) to seek disgorgement in federal court. has more time – up to 10 years Instead, the SEC was limited to seeking disgorgement as – to seek this remedy for “equitable relief.” scienter-based violations. This In 2017, the US Supreme Court held that disgorgement means that the SEC also will was a “penalty” subject to a five-year statute of have additional time to conduct limitations period in Kokesh v. SEC. Three years later, the complex investigations and will Supreme Court re-visited the SEC’s disgorgement have another incentive to authority in Liu v. SEC. In that decision, the Supreme pursue scienter-based charges. Court affirmed the SEC’s ability to seek disgorgement, but Financial institutions should limited disgorgement to the wrongdoer’s net profits and stay apprised of future court required courts to deduct legitimate expenses when decisions interpreting the calculating net profits. NDAA’s authorization of On 1 January 2021, the US Congress overrode former disgorgement. President Trump’s veto of the National Defense Authorization Act for Fiscal Year 2021 (NDAA), which expanded the SEC’s ability to seek disgorgement and addressed issues raised by the Kokesh and Liu decisions. The NDAA expressly authorizes the SEC to seek disgorgement for “unjust enrichment” and extends the statute of limitations for seeking disgorgement from five years to ten years for scienter-based violations. Immediate impact Short-term impact On the horizon 3 The Anti-Money Laundering Act of 2020 expanded Current The AML Act will affect many National Defense information-sharing initiatives for financial aspects of how financial Authorization Act institutions. institutions interact with for Fiscal Year federal and state regulators, 2021; H.R. 6395 On 1 January 2021, the US Congress overrode former enforcement agencies, and (116th) President Trump’s veto of the Anti-Money Laundering Act other financial institutions. The of 2020 (AML Act), which is intended to modernize anti- AML Act requires the Treasury Congress passes money laundering laws and assist financial institutions in to promulgate rules to the Anti-Money responding “to new and emerging threats.” To accomplish establish and execute Laundering Act of this goal, the AML Act requires the US Department of programs to increase 2020, amending Treasury (Treasury), along with the Attorney General, communication. For example, and modernizing federal and state financial regulators, and national the Treasury must issue rules the Bank Secrecy security agencies, to increase financial institutions’ ability allowing financial institutions to Act to discuss risks with the US government and with other share information with its financial institutions. foreign branches, subsidiaries, For example, the AML Act: and affiliates within one year of the AML Act’s enactment. • formalizes the FinCEN Exchange program, which was initially launched in 2017 to enhance Financial institutions should information sharing between government monitor updates in these areas agencies and financial institutions; and consider whether their policies and procedures are • requires the US Department of Treasury to structured to utilize these establish a pilot program that allows financial information-sharing programs institutions to share information contained in to their benefit. suspicious activity reports with its foreign branches, subsidiaries, and affiliates in certain jurisdictions to combat money laundering and the financing of terrorism; and • creates a Subcommittee on Innovation and Technology with Innovation Officers responsible for communicating with financial institutions (as well as regulators and law enforcement agencies) and providing technical assistance and guidance related to financial institutions’ implementation of new technologies. The Anti-Money Laundering Act of 2020 updated the Current As the new BSA whistleblower National Defense Bank Secrecy Act’s whistleblower program. program is modelled after the Authorization Act SEC’s program, it may have a for Fiscal Year similarly far-reaching impact. Immediate impact Short-term impact On the horizon 4 The Anti-Money Laundering Act (AML Act) updated and Financial institutions should 2021; H.R. 6395 strengthened the Bank Secrecy Act (BSA) whistleblower prepare for a potential increase (116th) program, which currently provides for whistleblower in enforcement stemming from awards in the lesser of $150,000 or 25% of the penalties whistleblower reports. Congress passes imposed in a related enforcement action. The BSA the Anti-Money program previously had been criticized because the Laundering Act of awards were considered insufficient to incentivize 2020, amending whistleblowers to report information to the US and modernizing government. the Bank Secrecy Act Under the new BSA program, whistleblowers are eligible for up to 30% of collected fines in a related enforcement action imposing more than $1 million in monetary sanctions. Notably, the new BSA whistleblower program is modelled after the whistleblower program implemented by the US Securities and Exchange Commission (“SEC”), which has been highly successful—whistleblower tips have led to the SEC’s recovery of more than $2 billion in monetary sanctions. The First Circuit Court of Appeals confirmed the US Current This decision may result in Alasaad v. Wolf government’s expansive authority to search additional potential exposure of (1st Cir. Feb. 9, electronic devices at the border. sensitive or confidential 2021) business information if border In the closely watched case Alasaad v. Wolf, the US Court agents seize and search an The First Circuit of Appeals for the First Circuit confirmed that border international business Court of Appeals agents can search electronic devices, including cell traveller’s cell phone, laptop, confirms phones and laptops, at the border without
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