New Legislation Introduced In 2017 Signals The Beginning Of A Strong Push For AML Reform

There is universal acknowledgement that anti-money laundering ("AML") monitoring has become progressively costlier (both in terms of time and money) since the Bank Secrecy Act ("BSA") was passed nearly five decades ago, and that compliance has become increasingly burdensome, especially for smaller regional and community institutions. According to the Financial Crimes Enforcement Network ("FinCEN"), nearly one million suspicious activity reports ("SAR") were filed in 2016 (up from 669,000 in 2013). According to a 2016 report by the Heritage Foundation, the cost of compliance with current AML rules could be as much as $8 billion a year. Notwithstanding the tremendous resources spent on AML compliance, money laundering is still rampant. The U.N. has estimated that the amount of money laundered every year is between $800 billion and $2 trillion dollars. However, according to a 2011 report issued by the U.N. Office on Drugs and Crime, less than one percent of this amount is seized by law enforcement.

In 2017 there were multiple indications that AML reform may be imminent. Early last year, the Clearing House, a trade association representing the largest U.S. banks, issued a comprehensive set of recommendations for redesigning the U.S. AML and terrorism-financing compliance framework. In its report, the Clearing House argues that the current regulatory regime does not account for - let alone leverage - today's data mining technology, but is instead rooted "in the analog technology of the 1980s." The accompanying recommendations include:

Enacting legislation that requires the reporting of beneficial owner information at the time of incorporation; De-prioritizing the investigation and reporting of activity of low law enforcement or national security consequence by raising the SAR dollar thresholds; and Facilitating the flow of raw data from financial institutions to law enforcement (including raw data about the parties to a transaction, transaction history, and information on other counterparties). 2017 also saw the introduction of several draft bills currently under discussion in Congress, including the Counter Terrorism and Illicit Finance Act (the "CTIFA"). Like the Clearing House, CTIFA would require beneficial ownership and control disclosure at the time of incorporation; and would raise currency transaction reporting ("CTR") thresholds from $10,000 to $30,000 and SAR thresholds from $5,000 to $10,000.

In late 2017 and January 2018, the Senate...