New AML Reform Bill Reaches Across the Aisle

A bipartisan group of senators have unveiled draft legislation to reform anti-money-laundering requirements, in another attempt to modernize a regime that financial services industries deem outdated.

The Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act, sponsored by Sens. Mark Warner, D-Va., Doug Jones, D-Ala., Tom Cotton, R-Ark., and Mike Rounds, R-S.D., would, for the first time, require shell companies – often used as fronts for criminal activity – to disclose their true owners to the U.S. Department of Treasury. It would also update decades-old anti-money laundering (AML) and combating the financing of terrorism (CFT) policies, by giving Treasury and law enforcement the tools they need to fight criminal networks. This includes improving overall communication between law enforcement, financial institutions, and regulators, and facilitating the adoption of critical 21st century technologies. 

The reform legislation would also require the Department of Justice to provide metrics on the utility of AML reporting submitted by banks and other financial institutions. It would also bolster coordination between financial regulators and law enforcement to combat AML threats. Yet the bill omits changes to the thresholds that require financial firms to report suspicious transactions.

The new bill means lawmakers in both the House and the Senate are zeroing in on a beneficial owner requirement as part of an AML reform bill. The draft legislation’s release comes a day before the House Financial Services Committee was set to mark up a bill led by Rep. Carolyn Maloney, D-N.Y., to require companies to report their true owners at incorporation. The Senate Banking Committee will also hold a hearing on beneficial ownership June 20.

The legislation aims to find a compromise between providing law enforcement tools to combat illicit crime, while not placing undue burdens to small businesses. Existing companies would have two years to report relevant beneficial ownership information within two years, while companies formed after the bill’s passage will need to provide beneficial ownership information at incorporation.

The AML legislation would impose criminal and civil penalties on companies that willingly violate beneficial ownership reporting requirements; but would give exemptions to companies that take reasonable steps to update minor errors. And it would prioritize the protection of personally identifiable information.