US to shift burden on banks over overhaul of money laundering laws

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The US Congress is expected to approve this week the first overhaul of the country’s anti-money laundering laws in decades, a change backed by politicians on both sides, banking regulators and the banks themselves.

Under the new legislation, all U.S. businesses will be required to register the identity of their beneficial owners in a database maintained by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), in order to prevent criminals from using front companies to hide ill-gotten gains.

Previously, the identification of beneficial owners was the responsibility of banks when companies requested bank accounts.

“This is the most significant LAB legislation since the Patriot Act 20 years ago,” said Daniel Stipano, partner at the law firm Buckley LLP, who has worked on AML law for 30 years as a regulator. and lawyer. “It helps bring the whole regime into the 21st century.”

By law, banks will no longer act as information gathering intermediaries between businesses and law enforcement, reducing their cost of compliance.

“In the post-9/11 world, and especially since the financial crisis, what you’ve seen is the regulators making the US banking system the de facto regulator of AML in the world,” said Ed Mills, political analyst at Raymond James. Accordingly, “when someone comes to do business, the bank has to become a detective. . . This bill shifts the onus on the client to self-disclose. ”

The bill also requires the Treasury to establish priorities for AML policy among law enforcement, banking supervisors and banks, and establish channels of communication between the three groups. The aim is to make the current system – in which transaction types or models automatically trigger alerts that banks must then notify to the Treasury in “suspicious activity reports” – simpler and more flexible.

Greg Baer, ​​chief executive of the Bank Policy Institute, a banking lobby group, said the law “allows banks to focus on the most dangerous offenders, under the direction of the Treasury.”

Dennis Kelleher, president of Better Markets, a nonprofit that often criticizes the banking industry, noted that the bill was “supported by many people across the ideological spectrum – the bottom line is that ultimately demanding transparency beneficial owners behind beneficial ownership. disguises are a win-win solution for everyone ”except for the criminals.

The legislation, the 2020 Anti-Money Laundering Law, has been incorporated into the annual defense budget authorization bill. The bill was passed by the House of Representatives on Tuesday and is expected to pass in the Senate on Wednesday, although President Donald Trump has threatened to veto it because it does not include other measures he wants.

President wants the bill providing for the repeal of section 230 of the Communication Decency Act, which protects social networks from defamation suits. “If the very dangerous and unfair section 230 is not removed completely.” . . I will be obliged to unequivocally VETO on the bill, ”the president wrote on Twitter last week. On Monday, he added “troop cuts in foreign lands” to his list of demands.

Members of Congress from both parties have indicated they are ready to vote to overturn a presidential veto.

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