One thing all BSA compliance professionals can agree on is that the requirements for identifying money laundering and terrorist financing are becoming increasingly complex globally. To address this, the 2021 National Defense Authorization Act (NDAA) brought significant reforms to the Bank Secrecy Act (BSA) and other Anti-Money Laundering (AML) laws, with over 200 pages of changes. In this article, we will explore the most significant changes that financial institutions and individuals involved in BSA compliance can expect as these updates are implemented.
First, the NDAA has introduced new reporting requirements for beneficial ownership. Under the updated regulations, certain U.S. companies will be required to provide FinCEN with information about their beneficial owners, who are defined as individuals with at least 25% ownership or control of the entity. This information includes the name, date of birth, address, and unique identifying numbers (e.g., driver’s license or passport numbers) of the beneficial owners. New companies will be required to report this information at the time of incorporation, while companies that experience a change in beneficial ownership will be required to provide updated information to FinCEN within a year. FinCEN will maintain a registry of the beneficial ownership information collected.
To encourage reporting of BSA/AML violations, the NDAA has also established a new whistleblower program that provides incentives to whistleblowers whose tips lead to monetary penalties exceeding $1 million. In these cases, whistleblowers can receive up to 30% of the monetary penalties assessed against the company. In addition, the NDAA has expanded the current whistleblower incentive law under the BSA, which provides rewards of $150000 or 25% of the penalty – whichever is lower – and has created a private right of action for whistleblowers who suffer retaliation for disclosing BSA violations. This means that whistleblowers can take legal action against their employer if they experience retaliation for reporting BSA violations.
Another significant change brought about by the NDAA updates is the clarification that the BSA applies to digital assets, such as cryptocurrency. To achieve this, the NDAA has amended various provisions of the BSA to include references to digital assets. This means that financial institutions and individuals involved in BSA compliance must now be aware of and adhere to regulatory requirements when dealing with digital assets.
Finally, the NDAA has increased the penalties for BSA violations. Financial institutions that fail to report suspicious activity can now face higher fines, while individuals who violate the BSA may also face increased fines. These stricter penalties serve to further incentivize compliance with the BSA and AML laws.
In summary, the NDAA updates to the BSA and AML laws bring significant changes to the reporting requirements for beneficial ownership, the creation of a new whistleblower program with incentives and private right of action for whistleblowers, the clarification that the BSA applies to digital assets, and increased penalties for BSA violations. These changes have important implications for financial institutions and individuals involved in BSA compliance, and it is crucial that they are aware of and adhere to the updated regulations.
