A&M's Peter Kwan has been keeping an eye on AML reform and gives us an update on another promising bill on Capitol Hill.
The bill, known as the “Counter Terrorism and Illicit Finance Act (CTIFA),” goes well beyond the measures in similar bills like H.R. 4373 (see our post on H.R. 4373 here) by calling for the creation of a national directory of Beneficial Owners –a topic which is at the top of many compliance departments’ minds due to the upcoming beneficial ownership and CDD final rule that goes into effect later this year. The CTIFA is authored by Rep. Steve Pearce (R-NM) and Rep. Blaine Luetkemeyer (R-MO) but still in draft form (with impending amendments more than likely).
While there is a considerable amount of overlap between CTIFA and earlier bills, there is a clear distinction in the ambition and comprehensiveness of this new bill. Some other noteworthy provisions include:
- Elevating the floor for Currency Transaction Reports (“CTRs”) and Suspicious Activity Reports (“SARs”) – something also prioritized as part of H.R. 4373;
- Offering absolute civil immunity for SAR filing;
- Expanding the scope of voluntary information sharing among financial institutions;
- Granting FinCEN with the ability to issue no-action letters, as well as a review into whether FinCEN needs to assume a greater role in regulatory examinations;
- Providing safe harbor for AML-related technological innovation (intended to improve the AML program) which inadvertently violates the institutions AML program;
- Requiring multiple reviews into the effectiveness of AML Compliance, including:
- A review of the costs to the private sector,
- A yearly report to the Department of the Treasury regarding the usefulness of BSA reporting to law enforcement, and
- A study within two years which provides “a comprehensive quantitative and qualitative estimate of the annualized costs to the private sector to comply with the statutory and regulatory requirements” of the BSA.
- A study within five years regarding the effectiveness of the beneficial ownership reporting provisions
It is clear that the tides of change are brewing on evolving the regulatory landscape around AML. The changes proposed in the bill will arguably represent the most substantive changes to AML regulation in the U.S. since the passing of the USA PATRIOT Act in response to the September 11, 2001 attacks.
What the CTIFA aims to do is to build upon the foundation laid by similar bills and layering on checks and balances to require that the effectiveness of contemporaneous AML and CTF efforts are continuously measured, reviewed and most importantly - revised. While I fear that this bill will eventually get lost in the shuffle on the Hill, I am cautiously optimistic that the changes that are being proposed will reverberate across an industry that is more cost- conscious and technologically astute than it was when the 1970 Bank Secrecy Act was put into law.
the current SAR filing regime has been criticized by some as producing — over time — an ever-increasing barrage of SAR filings by risk-adverse financial institutions inclined to engage in “defensive filing,” which is costly to the institutions and can lead to SARs of limited value to law enforcement