News

Draft legislation that would establish a U.S. registry of beneficial owners and bolster the national framework to combat illicit finance cleared the House of Representatives as part of a larger appropriations bill.

Lawmakers Tuesday approved the Defense Department’s budget proposal for Fiscal Year 2021, which begins Oct. 1^st, after voting 336 to 71 to attach dozens of amendments to the legislation, including the 101-page Corporate Transparency Act, a day earlier.

The move will prompt Senate consideration of the measures over the next three months, regardless of whether a parallel effort by a pair of senior senators to add draft legislation to the upper house’s version of the National Defense Authorization Act, or NDAA, succeeds this week.

Under the Corporate Transparency Act, legal entities incorporating in any U.S. state or Indian Tribe would have to provide the U.S. Treasury Department’s Financial Crimes Enforcement Network with the personal information of their ultimate owners, and to update it annually, unless Treasury determines via rulemaking that a different timeframe may be more suited.

FinCEN would be authorized to share the data with local, state, tribal and federal law enforcement agencies that have an “existing investigatory basis” to request it, as well as with foreign authorities pursuant to international treaties or other bilateral agreements.

Financial institutions would also be empowered to access the data as part of their efforts to comply with customer due diligence and other obligations under the 1970 Bank Secrecy Act and 2001 U.S. Patriot Act, and as long as they first obtain the targeted customer’s consent.

The beneficial ownership and other AML reform provisions appended to the House NDAA Monday differ only in minor, technical ways, for instance adjusting implementation from FY2020 to FY2021, from legislative language that already won passage in the lower chamber last October.

Both versions merge Rep. Carolyn Maloney’s (D-NY) Corporate Transparency Act with nearly three dozen proposed reforms to the Bank Secrecy Act pitched by Rep. Emanuel Cleaver (D-MO) with the COUNTER Act, including enhanced training of federal examiners, increased privacy protections for BSA data and the expansion of AML obligations to antiquities dealers.

The COUNTER Act also calls for facilitating information-sharing between financial institutions’ domestic and foreign operations, fostering the deployment of innovative technologies in the compliance space and buttressing FinCEN’s budget and staffing.

The Senate never formally took up the measures amid the coronavirus pandemic and other legislative priorities, even though eight senior Republican and Democratic senators, including Sens. Mark Warner (D-VA), Tom Cotton (R-AR), Doug Jones (D-AL) and Mike Rounds (R-SD)  introduced similar draft legislation, the ILLICIT CASH Act, in Sept. 2019.

More recently, the top Republican and Democrat on the Senate Banking Committee, Mike Crapo (R-ID) and Sherrod Brown (D-OH), have been leading a push to add a revised version of the bill, renamed the Anti-Money Laundering Act, as an amendment to the Senate’s version of the NDAA.

That effort remains ongoing, though its fate appears uncertain. The broader NDAA is expected to clear the Senate in the coming days.

Notwithstanding, the House-approved language on beneficial ownership and AML reform will now become part of negotiations between senators, representatives and their staffers as they reconcile differences in the two chambers’ versions of the defense budget bill.

The single, agreed-to text that emerges from this process known as “conference,” most likely by the end of September, will be put to a final vote on the floor of the House and Senate.

The latest legislative developments have shown that the establishment of a beneficial ownership registry and other proposed reforms to the BSA have “momentum” and are seen as a priority by both the House and Senate leadership, a Congressional aide told ACAMS moneylaundering.com.

“It would be nice to have it in the Senate NDAA, but given what you’ve got, it’s a pretty good situation,” the aide wrote in an email, asking to remain unnamed. “It’s really exciting. America is finally trying to reclaim its historic spot as the world’s anti-corruption champion.”

A separate bill that would task FinCEN with disbursing rewards to individuals that provide information leading to the interdiction of U.S. assets acquired with the proceeds of foreign government corruption, the Kleptocracy Asset Recovery Rewards Act by Rep. Stephen Lynch (D-MA), also made it into the House NDAA as an amendment.

Contact Valentina Pasquali at vpasquali@acams.org.