AMLA and the Future of Financial Crime Regulation: Q&A with Chip Poncy of K2 Integrity | Thomson Reuters Regulatory Intelligence and Compliance Learning



K2 Integrity’s Chip Poncy recently answered questions about financial regulation, the recent anti-money laundering law of 2020 and what to expect in the future

The Biden administration took bold steps in the first six months. From national security to immigration policies, the president is moving fast, and the ecosystem of financial institutions is closely monitoring how he implements the recent Anti-Money Laundering Act of 2020 (AMLA), anti-money laundering legislation. most consistent laundering passed by Congress in decades.

Poncy chip, Global Co-Head of Financial Crimes Risk Management Practice at K2 Integrity, is a former Senior Advisor to the US Department of the Treasury and former Director of the Department of the Treasury Office of Strategic Policy for Terrorist Financing and Financial Crimes. He recently spoke at a virtual panel hosted by Thomson Reuters, BSA reform: Experts discuss NDAA and what it means for financial institutions.

Here are some of the webinar questions on AML and financial regulation in general, along with Poncy’s answers.

Do you think the Secretaries of State will do anything different because of these new regulations?

Poncy chip: The LBA is carefully designed to impose a minimal implementation burden on Secretaries of State. The law does not require secretaries of state to collect information on beneficial owners; instead, they are simply required to inform those filing applications to register a business (or renew a registration) of the Financial Crimes Enforcement Network (FinCEN) reporting requirements and provide those applicants with a copy of the corresponding FinCEN form.

That said, it is possible that Secretaries of State see this as a low-cost opportunity to start collecting beneficial ownership information for themselves. If so, they could simply require applicants to provide them and FinCEN with a copy of the form.

Do you think that FinCEN’s prior opinion on the regulatory proposal will be put on hold for AML information?

Poncy chip: The implementation of the AMLA is going to require a huge amount of rules and political guidance. The dedicated resources and attention of FinCEN and Treasury management, as well as other agencies such as federal functional regulators and law enforcement, will be essential to meet the deadlines and expectations set by Congress. This workload and rigorous schedule may mean that FinCEN has to postpone the publication of the final rules related to the proposed regulatory notices that it published last year that were not mandated by Congress, such as the proposed regulation. ” Lower the value threshold for travel rule and compliance of fund transfer record keeping. .

At the same time, a second part of the implementation of the LBA is to increase the resources of FinCEN, which will also strengthen its capacity to manage several complex regulations in parallel. The Biden administration has already submitted a request increase the FinCEN budget by 50% from current levels, although an increase in staff would take time.

Ultimately, the order in which FinCEN publishes the final rules and the implementation offered to industry will depend on the priorities and resources of FinCEN, as well as those of the Treasury and interagency stakeholders. Industry input and consultation will be essential throughout the implementation of the AMLA. As this continues to evolve, compliance officers will want to make sure they are monitoring the space closely and have their own resources ready to meet new requirements.

Do we know the data format of the centralized register of beneficial owners, and will this data be extractable? If so, do you see this as a requirement for auditors to validate their bank’s customer base and the customer identification program process?

Poncy chip: The easy answer to this is that we don’t know what the format of the FinCEN ledger will be and to what extent financial institutions will be able to extract data at scale. However, given the LBA’s emphasis on security and confidentiality and the requirement that financial institutions must obtain their client’s consent to access client beneficial ownership information in the ledger, there is there is reason to think that access will be at least on a “need to know” basis.

In addition, given the current verification and trust provisions associated with the customer due diligence rule, any expectation that financial institutions access the beneficial owner register on a regular rather than an exceptional basis can introduce a significant burden without benefit. clear by diverting AML resources within financial institutions and FinCEN.

Yet the existence of the register, regardless of its format, will create several important issues for financial institutions and other institutions subject to the Banking Secrecy Act (BSA). These questions certainly include how financial institutions will be expected (or allowed) to use information in the ledger to validate or cross-check the information they collect from their customers, and what the obligations of financial institutions will be if they discover discrepancies. .

How are antique dealers defined? Does a mom-and-pop store look like a Hobby Lobby or a Christies?

Poncy chip: AMLA brings together participants from the antiques industry – defined as “a person engaged in the antiques trade, including an advisor, consultant or any other person who engages as a business in the solicitation or sale of antiques “- within the scope of the BSA. This definition is broad and is not limited to individuals or businesses that could be considered dealers. It also does not distinguish between participants based on the sophistication or volume of trade they conduct in the industry.

There is a lot that we don’t know about how FinCEN will manage this sector, and a lot will depend on the specific regulations that will be issued. That said, in its oversight of other types of entities that fall under the BSA – such as dealers in precious metals and stones, casinos and financial institutions – FinCEN has shown that it takes a risk-based approach and considers the characteristics of particular sectors as as well as of individual entities. So while “Main Street Antiques” may need to meet the same basic requirements as Sotheby’s, FinCEN is likely to recognize that its AML program will be simpler and require fewer resources.

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