Introduction

On January 1, 2021, Congress passed the Anti-Money Laundering Act of 2020 (AMLA), which encompassed the most sweeping reforms to U.S. anti-money laundering (AML) policy in recent decades. Contained within the William M. (Mac) Thornberry National Defense Authorization Act (NDAA) for FY2021 (Division F, P.L. 116-283), AMLA spans 59 provisions, including a distinct title known as the Corporate Transparency Act (CTA; Title LXIV).¹ These provisions aim to significantly update and expand aspects of the existing policy framework for anti-money laundering and combating the financing of terrorism (AML/CFT), originally established under the Bank Secrecy Act (BSA) in 1970.²

The primary federal agency responsible for implementing the majority of AMLA's provisions is the Financial Crimes Enforcement Network (FinCEN). A bureau of the Department of the Treasury, FinCEN is also known as the U.S. government's financial intelligence unit (FIU).³ FinCEN has described AMLA implementation as a "top priority" and has fulfilled several AMLA reporting requirements and initiated the rulemaking process for several AMLA requirements, including beneficial ownership disclosure requirements pursuant to the CTA.⁴ According to FinCEN, AMLA, including the CTA, require approximately 40 rulemakings or other congressional mandates, such as periodic reporting on implementation efforts, assessments, and findings.⁵

Some Members of Congress and other policy observers and stakeholders are closely monitoring FinCEN's progress in implementing AMLA, including the CTA. To this end, AMLA requires the FinCEN Director to testify before Congress on an annual basis for five years, beginning in 2022, on AMLA implementation (§6403). In the first of such testimonies on April 28, 2022, FinCEN acknowledged to the House Financial Services Committee that it had fallen behind in meeting AMLA's implementation deadlines due in part to a lack of resources.⁶ At the hearing, some Members of Congress also raised substantive concerns regarding FinCEN's rulemaking proposals for CTA implementation, while others have expressed support.⁷

After providing a brief overview on FinCEN and the underlying policy rationales that contributed to AMLA's enactment, this report focuses on identifying AMLA's key provisions—and the status of AMLA-related rulemaking and reporting requirements to be implemented by the Treasury Department, chiefly FinCEN. The report concludes with a discussion of selected issues for congressional oversight and further legislative action, including challenges associated with meeting AMLA-specified deadlines (several implementation deadlines are past due), funding (AMLA authorized but did not appropriate funding for its implementation), and the establishment of the beneficial ownership database required by the CTA.

Several bills in the 117^th Congress seek further changes to the BSA and the U.S. government's AML/CFT policy framework, including the House-passed National Defense Authorization Act for Fiscal Year 2023 (H.R. 7900; FY2023 NDAA), which includes multiple provisions on financial services matters (Title LIV, §§5401-5475). See section on "Selected Issues for Congress" for further discussion.

Background

FinCEN has described AMLA as a "landmark piece of legislation" that provides FinCEN a "leading role" in strengthening the U.S. AML/CFT architecture.⁸ This section provides an overview of FinCEN and provides context for several primary policy rationales that contributed to AMLA's enactment—a desire for BSA "modernization" and FinCEN "transformation" as well as domestic and international pressure to address perceived AML/CFT gaps in corporate transparency.

FinCEN: An Overview

FinCEN plays a key role in the Secretary of the Treasury's overall stewardship of U.S. economic and financial systems and related policy, particularly with respect to AML/CFT policy. FinCEN's mission is "to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorism, and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence."⁹ For FY2022, FinCEN's budget totaled approximately $172.7 million.¹⁰

FinCEN was established in 1990 to exercise AML regulatory functions under the BSA. Its responsibilities include developing regulations and related policies that require banks and other financial institutions to safeguard the U.S. financial system from illicit activity. In addition to its responsibilities for BSA oversight and rulemakings, FinCEN engages with the private sector, federal regulators, law enforcement, and the international community on AML/CFT matters. As the U.S. FIU, FinCEN also engages with counterparts around the world through the Egmont Group to share information and expertise in support of U.S. and foreign financial crime investigations.¹¹

As part of its mission, FinCEN collects and maintains a central repository of financial intelligence (e.g., financial transaction data, including suspicious activity reports and currency transaction reports) from financial institutions. In FY2022, FinCEN received approximately 23.5 million BSA-mandated financial transaction reports, including approximately 3.6 million suspicious activity reports (SARs).¹² For FY2023, FinCEN projects that it will receive approximately 24 million BSA report filings, including approximately 3.7 million SARs.¹³ FinCEN analyzes and disseminates such information to law enforcement agencies in support of investigations pursuing perpetrators of white collar crime; drug trafficking and other transnational criminal activity; and terrorism and other matters of national security concern.¹⁴ The "follow the money" approach to federal criminal investigations, built in part on the basis of financial intelligence collected by FinCEN and accessed by various law enforcement agencies, has reportedly contributed to a substantial number of money laundering-related convictions.¹⁵

The FinCEN Director reports to the Under Secretary of the Treasury for Terrorism and Financial Intelligence (TFI) and the Secretary-appointed position is not subject to Senate confirmation.¹⁶ As of mid-September 2022, Secretary Janet Yellen had not appointed a FinCEN Director. The current FinCEN Acting Director is Himamauli "Him" Das, whose appointment was announced on August 3, 2021.¹⁷

BSA "Modernization" and FinCEN "Transformation"

AMLA is the culmination of multiple statutory proposals introduced in the 116^th Congress intended to comprehensively strengthen and modernize FinCEN's AML/CFT capabilities.¹⁸ As noted in the joint explanatory statement published in the conference report accompanying the FY2021 NDAA (H.Rept. 116-617),

The conferees note that the current Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regulatory framework is an amalgamation of statutes and regulations that are grounded in the Bank Secrecy Act (BSA) (21 U.S.C. 5311 et seq.), which the Congress enacted in 1970. This decades-old regime, which has not seen comprehensive reform and modernization since its inception, is generally built on individual reporting mechanisms (i.e., currency transaction reports (CTRs) and suspicious activity reports (SARs)) and contemplates aging, decades-old technology, rather than the current, sophisticated AML compliance systems now managed by most financial institutions. The provisions ... [in AMLA] comprehensively update the BSA for the first time in decades and provide for the establishment of a coherent set of risk-based priorities.¹⁹

In line with the mandates enacted by AMLA, FinCEN is integral to what Acting Director Him Das describes as "transformation of the [AML/CFT] regulatory regime writ large."²⁰

Until recently, the overarching legal foundation of our regime was an artifact of the moment it was most recently updated—in the wake of 9/11—and like most 21-year-old things, it has not entirely kept up with the times. Just as earlier incarnations of the Bank Secrecy Act were laser-focused on countering drug-related financial flows, the updates in the USA PATRIOT Act really emphasized disrupting the money flows of groups like al Qaida. It never anticipated the challenges of the 2020s: digital assets, strategic corruption, an explosion of kleptocrats hiding their wealth in American shell companies, or artificial intelligence [AI] that could help us recognize these crimes and others.

And although there has been important work through regulation, rulemaking, and guidance to keep pace with evolving risks, our legal foundation was in many respects built, as the aphorism goes, "to fight the last war." Or at least that was the case until 2021, when Congress passed the Anti-Money Laundering Act of 2020, or the AML Act.

The AML Act ... touched off a new, post-post-9/11 era for anti-money laundering, giving FinCEN the authority to, quote, "streamline, modernize, and update the AML/CFT regime of the United States," and that, indeed, is what we are doing.

... FinCEN is helping transform our nation's AML/CFT regime from post-9/11 to post-pandemic; from al Qaida to AI and digital assets...

Corporate Transparency, Beneficial Ownership Disclosure, and Illicit Financial Flows

Historically, a key money laundering vulnerability of the international financial system has been the ability for individuals to create certain legal entities, including in the United States, without having to consistently disclose and update beneficial ownership information (i.e., identifying information of the natural persons who own or control legal entities). Moreover, where beneficial disclosure requirements have existed, they have differed across jurisdictions, including with respect to the role of the government in collecting such information and whether such information is publicly accessible.

In 2005, for example, the U.S. Money Laundering Threat Assessment identified misuse of shell companies and trusts as a key vulnerability to the U.S. financial system:

Legal entities such as shell companies and trusts are used globally for legitimate business purposes, but because of their ability to hide ownership and mask financial details they have become popular tools for money launderers.

The use of these legal structure for money laundering is well-established. The United Nations noted in a 1998 report that "the principal forms of abuse of secrecy have shifted from individual bank accounts to corporate bank accounts and then to trust and other corporate forms that can be purchased readily without even the modest initial and ongoing due diligence that is exercised in the banking sector."

The competition among certain states to attract legal entities to their jurisdictions has created a "race to the bottom," and a real money laundering threat.²¹

Treasury's February 2022 National Money Laundering Risk Assessment confirms that such lack of timely access to beneficial ownership information (which reportedly risks delays in federal law enforcement investigations) remained a key U.S. AML/CFT regulatory regime weakness:

The deliberate misuse of legal entities and arrangements, including limited liability companies and other corporate vehicles, trusts, partnerships, and the use of nominees, continue to be significant tools for facilitating money laundering and other illicit financial activity in the U.S. financial system.²²

This AML/CFT vulnerability has placed the United States under domestic and international pressure, including from the Financial Action Task Force (FATF)—a key intergovernmental AML/CFT standard-setting body, of which the United States was a founding member, to tighten its AML/CFT regime with respect to beneficial ownership disclosure requirements.²³ Building on its 2006 criticism of the U.S. government's AML/CFT regime, FATF's 2016 review of the U.S. government's AML/CFT regime reiterated that the "[l]ack of timely access to adequate, accurate and current beneficial ownership (BO) information remains one of the fundamental gaps in the U.S. context."²⁴

Since at least the 110^th Congress, legislation has been introduced to address long-standing concerns raised by the U.S. government, including federal law enforcement, domestic observers, and international evaluators, about the lack of beneficial ownership transparency among certain U.S.-established legal entities.²⁵ AMLA built on these efforts to enact the foundational mandate for federal beneficial ownership disclosure and information collection in the United States. Implementing AMLA, including the establishment of a federal process for collecting beneficial ownership information pursuant to the CTA, also supports the Biden Administration's December 2021 U.S. Strategy on Countering Corruption, which identifies "curbing illicit finance" as one of five pillars of the U.S. government's anti-corruption approach.²⁶

AMLA: Key Provisions

Division F of the FY2021 NDAA (P.L. 116-283) is the Anti-Money Laundering Act of 2020 (AMLA). AMLA is composed of five distinct titles:

• Title LXI—Strengthening Treasury Financial Intelligence, Anti-Money Laundering, and Countering the Financing of Terrorism Programs
• Title LXII—Modernizing the Anti-Money Laundering and Countering the Financing of Terrorism System
• Title LXIII—Improving Anti-Money Laundering and Countering the Financing of Terrorism Communication, Oversight, and Processes
• Title LXIV—Establishing Beneficial Ownership Information Reporting Requirements (the Corporate Transparency Act or CTA)
• Title LXV—Miscellaneous

If or when fully implemented, AMLA has the potential to significantly modernize the existing AML/CFT regulatory framework originally established more than 50 years ago.

Key AMLA provisions include the following:

• Establishing beneficial ownership disclosure and transparency. Within AMLA is the Corporate Transparency Act (CTA; Title LXIV of Division F of the FY2021 NDAA; §§6401-6403), which for the first time imposes a federal requirement for identifying beneficial owners of certain legal entities (i.e., the natural persons who own or control, directly or indirectly, such entities).
• Expanding the BSA's purpose and mandating a review of the AML/CFT regulatory framework. AMLA codified an expansion the BSA's stated purpose to include preventing illicit financial activity from harming the U.S. financial system and national security (§6101).²⁷ Correspondingly, AMLA mandates potentially significant rulemaking changes to core aspects of the existing AML/CFT regulatory framework, including revising or eliminating "outdated" or "redundant" regulations and enhancing opportunities for financial institutions to enhance their compliance programs through technological innovation (§6216).
• Promoting public-private partnership and engagement opportunities. AMLA codifies opportunities for public-private information sharing, including through a "FinCEN Exchange" (§6103), a new Subcommittee on Innovation and Technology under the Bank Secrecy Act Advisory Group (§6207), a Financial Crimes Tech Symposium (§6211), and other mechanisms (e.g., §6214 on "encouraging information sharing and public-private partnerships" and §6306 on "cooperation with law enforcement").
• Introducing new staffing options and programs. AMLA directs the establishment of an interagency AML/CFT personnel rotation program (§6104), authorizes special hiring authorities for the appointment of certain officials (§6105), codifies a Treasury financial attaché program (§6106), and requires FinCEN to maintain a cadre of analytical experts who can collaborate with other federal agencies (§6304). AMLA also creates new staff positions for domestic FinCEN liaisons (§6107), foreign financial intelligence unit liaisons (§6108), BSA innovation officers (§6208), and BSA information security officers (§6303).
• Promoting international cooperation on financial crime matters, while protecting financial intelligence from misuse. AMLA directs the Department of the Treasury to increase technical assistance (§6111) and international coordination (§6112) with foreign countries to promote compliance with international AML/CFT standards and best practices, as well as stronger AML legal frameworks and enforcement. AMLA also authorizes a pilot program in which financial institutions subject to U.S. jurisdiction may share SAR information with their foreign branches, subsidiaries, and affiliates (§6212).
• Strengthening enforcement tools to deter money laundering and other forms of financial crime. AMLA formalizes a mandate to collect data on how BSA reports contribute to actionable investigative leads and prosecution success (§6201). Among other provisions, AMLA also authorizes the application of additional civil penalties for repeat BSA violators (§6309), bars certain BSA violators from serving on boards of U.S. financial institutions (§6310), and adds a new prohibition on the concealment of the source of assets in monetary transactions (§6313). AMLA also authorizes the Secretary of the Treasury and the Attorney General to subpoena records from any foreign bank that maintains a U.S. correspondent account (§6308).
• Invigorating BSA whistleblower provisions. Modeled in part on the Securities and Exchange Commission's whistleblower program enacted as part of the Dodd-Frank Act in 2010, AMLA significantly revised BSA whistleblower provisions to increase the potential reward amount for whistleblower disclosures, expand who can qualify as a whistleblower, and provide whistleblowers protections against retaliation (§6314).
• Expanding the BSA's regulatory scope to include businesses that provide services involving "value that substitutes for currency." AMLA clarifies that financial agencies and financial institutions (including currency exchanges and money transmitting businesses) covered by the BSA include businesses that provide services related to "value that substitutes for currency" (§6102(d)). Examples of value that may substitute for currency could include some digital assets and virtual currencies. AMLA also redefines "monetary instruments" to include "value that substitutes for any monetary instrument" otherwise already defined in current law.

AMLA Implementation: Rulemakings

A primary aspect of early AMLA implementation has centered on AML/CFT rulemakings, including those required to implement the CTA. This section provides an overview of significant AMLA provisions for which rulemakings may be required for full implementation—and includes information on the status of such rulemakings. While some rulemakings are in progress, others appear delayed. Additionally, FinCEN remains in the process of finalizing several other significant AML-related regulations that predate or are otherwise not specified in AMLA.²⁸

The CTA and Beneficial Ownership Disclosure

In one of its most significant rulemaking changes, AMLA established a federal requirement for identifying the beneficial owners of corporate entities. Section 6403 of the CTA, among other provisions, amended the BSA to add a new Section 5336, "Beneficial Ownership Information Reporting Requirements," to Subchapter II of Chapter 53 of Title 31 of the United States Code.²⁹

Pursuant to the CTA, those forming certain new legal entities and those owning certain existing entities will be required to provide their full legal name, date of birth, current residential or business street address, and a copy of an acceptable identification document for natural persons who own or control such entities, subject to the definitions. In the CTA, the term beneficial owner is defined, in part, to mean a person who directly or indirectly owns 25% or more of a legal entity or "exercises substantial control" over it.³⁰

The CTA designated FinCEN as the central repository for collecting information on the beneficial owners of certain legal entities.³¹ Covered entities must update beneficial ownership information as it changes. The Secretary of the Treasury is required to evaluate within two years of enactment whether there is a need to shorten the deadline for entities to update changes in beneficial ownership information (currently set at one year after such information changes).³²

Pursuant to AMLA, FinCEN must store such information in its nonpublic database for at least five years and allow various U.S. government entities and financial institutions to access the information, subject to certain terms. Under the act, penalties for unauthorized disclosure of this information to the public are significant.³³

Regulations to implement the CTA were required within one year of enactment and are now overdue. Following an earlier advance notice of proposed rulemaking (ANPRM) in April 2021, FinCEN released a notice of proposed rulemaking (NPRM) in December 2021 to implement the beneficial ownership reporting requirements under AMLA.³⁴ FinCEN's December 7, 2021, proposed rule identified two types of reporting companies—domestic and foreign—and FinCEN noted that it expected these to include business trusts, corporations, limited liability companies, and most other limited partnerships.³⁵ Entities established before the effective date of the final rule would have one year to provide ownership information to FinCEN. Those formed after the effective date would have 14 days to provide this information.³⁶

FinCEN received 458 comments in response to its ANPRM and NPRM.³⁷ The December 2021 NPRM is reportedly the first of three proposed rules that FinCEN intends to issue with respect to the implementation of the CTA.³⁸ A second subsequent proposed rule (not yet issued) would detail how FinCEN's database could be accessed and by whom. A third proposed rule (not yet issued) would seek to update existing customer due diligence requirements for financial institutions, including with respect to beneficial ownership information disclosure.

The timeline and status of next steps in the rulemaking process remains unclear. According to the Treasury Department's Semiannual Agenda and Regulatory Plan, published in the Federal Register on August 8, 2022, FinCEN is reviewing the comments it has received in response to its proposed rulemakings and "considering the timing and sequence of the regulatory actions it will take to fulfill the requirements of Section 5336 in light of the issues of regulatory interaction that the comments raise."³⁹

One issue raised in comments to FinCEN's December 2021 NPRM related to how FinCEN had defined "substantial control" over a covered corporate entity (referred to as a "reporting entity" in the NPRM), for the purposes of determining whether someone is a beneficial owner of that entity;⁴⁰ and how broadly it defined "ownership interest."⁴¹ In a February 2022, letter to Secretary of the Treasury Janet Yellen and FinCEN Acting Director Das, House Financial Services Committee Chair Maxine Waters, Senate Banking Committee Chair Sherrod Brown, and House Oversight and Reform Committee Chair Carolyn Maloney commended FinCEN for using a definition of "substantial control" the authors characterized as broad and flexible enough to encompass functional control over a reporting entity using novel means of control. The authors also flagged the importance in the NPRM of including a definition of "ownership interest" that encompassed not only equity ownership, but also other informal means to structure ownership that may serve to conceal such ownership, such as unwritten understandings or relationships between individuals. A July 2018, report by the Financial Action Task Force (FATF) on the Concealment of Beneficial Ownership flagged the use of informal nominees, or "straw men" as nominee shareholders or directors, as a key means of hiding the identities of beneficial owners by criminals.⁴² On the other hand, a March 2022 letter to Treasury and FinCEN from Ranking House Financial Services Committee Member Patrick McHenry and Ranking House Committee on Small Business Member Blaine Luetkemeyer stated that the definition of "substantial control" used in the NPRM was overly broad.⁴³

Status of Other AMLA Rulemaking Requirements

As described below, FinCEN is developing several AMLA rules, including rules on AML/CFT priorities, AML regulations for dealers in antiquities, a pilot program to share SARs, and a process for issuing "no-action" letters. The AMLA contains several other prospective AML/CFT-related rulemaking provisions that are in process as well.

Rulemaking on AML/CFT Priorities

Section 6101(b) of the AMLA amends 31 U.S.C. §5318 to require the Secretary of the Treasury to "establish and make public priorities" for AML/CFT policy.⁴⁴ Pursuant to this requirement, FinCEN issued an initial list of eight AML/CFT priorities on June 30, 2021 (Treasury is required to update its priorities at least once every four years).⁴⁵ Section 6101(b) of the AMLA further requires the Secretary of the Treasury, acting through the FinCEN Director, to, "as appropriate, promulgate regulations" to implement its public AML/CFT policy priorities.⁴⁶ Such rulemaking was due within 180 days of the issuance of the first AML/CFT policy priorities on June 30, 2021. According to the Treasury Department's Semiannual Agenda and Regulatory Plan, published in the Federal Register on August 8, 2022, FinCEN intends to issue an NPRM to implement the provisions in Section 6101 of the AMLA.⁴⁷

AML Regulations for Dealers in Antiquities

Section 6110 of the AMLA requires the Secretary of the Treasury to issue proposed rules within 360 days of enactment that subject "a person engaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities" to BSA requirements. According to FinCEN, trade in antiquities may facilitate illicit value transfers and be used as a money laundering method by a wide range of terrorist organizations, transnational criminal networks, and other malign actors.⁴⁸ On March 9, 2021, FinCEN issued a notice to inform financial institutions about anticipated regulatory activity related to antiquities trade.⁴⁹ On September 24, 2021, FinCEN published an ANPRM in the Federal Register, launching the regulatory process for applying BSA requirements to persons engaged in the trade in antiquities.⁵⁰ FinCEN received 37 comments on its ANPRM.⁵¹ According to the Department of the Treasury's Semiannual Agenda and Regulatory Plan, published in the Federal Register on August 8, 2022, FinCEN intends to issue an NPRM by early 2023.⁵²

Pilot SAR Sharing Program

Unauthorized disclosure of the contents or existence of a SAR—including with foreign branches, subsidiaries, and affiliates of U.S. financial institutions—may result in civil penalties and criminal sanctions. Section 6212 of the AMLA requires the Secretary of the Treasury, in coordination with the FinCEN Director, to issue rules establishing a pilot program to permit financial institutions subject to BSA reporting requirements to share SARs and related information otherwise subject to SAR confidentiality limitations with their foreign branches, subsidiaries, and affiliates.

Unless the Secretary authorizes a case-specific exception and notifies the Senate Committee on Banking, Housing, and Urban Affairs and House Committee on Financial Services that such an exception is in the national security interest of the United States, participating financial institutions may not share SAR information with foreign branches, subsidiaries, or affiliates located in China or Russia. Moreover, they may not share SAR information with foreign branches, subsidiaries, or affiliates located in jurisdictions identified as a state sponsor of terrorism, subject to U.S. sanctions, or that "the Secretary has determined cannot reasonably protect the security and confidentiality of such information."

The pilot program would terminate three years after enactment, but it may be extended up to two additional years if the Secretary reports to the Senate Committee on Banking, Housing, and Urban Affairs and House Committee on Financial Services that authorizing such an extension is in the national interest of the United States, among other requirements. On January 25, 2022, FinCEN published an NPRM in the Federal Register for such a time-limited pilot program.⁵³ FinCEN received 17 comments on its NPRM.⁵⁴ According to the Department of the Treasury's Semiannual Agenda and Regulatory Plan, published in the Federal Register on August 8, 2022, FinCEN intends to issue a final rule by the end of 2022.⁵⁵

No-Action Letter Process

Section 6305 of the AMLA requires the FinCEN Director to conduct an assessment on whether FinCEN should establish a process for issuing BSA "no-action" letters.⁵⁶ As described in Section 6305 of the AMLA, the issuance of "no-action" letters could involve FinCEN responding to inquiries concerning the applicability of BSA and related AML/CFT provisions to specific conduct, along with requests for an official statement as to whether FinCEN or any relevant federal functional regulator intends to take an enforcement action with respect to such conduct. In turn, Section 6305 of the AMLA requires the Secretary of the Treasury to submit a report to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services, within 180 days of enactment, with FinCEN's findings and determinations, as well as to propose rulemakings, as appropriate, to implement such findings and determinations.⁵⁷ On June 28, 2021, FinCEN issued the required report, indicating that "FinCEN assesses that it should establish a no-action letter process through rulemaking, provided sufficient resources are made available."⁵⁸ On June 6, 2022, FinCEN published an ANPRM in the Federal Register.⁵⁹ FinCEN received 25 comments on its ANPRM.⁶⁰

Other Prospective Rulemakings

Other AMLA provisions may involve rulemakings for which indications of progress are not publicly available as of the date of this report's publication. Such provisions include the following:

• Section 6103 of the AMLA establishes a "FinCEN Exchange" to facilitate voluntary public-private information sharing partnership between law enforcement agencies, national security agencies, financial institutions, and FinCEN. The provision also requires FinCEN to, "as appropriate, promulgate regulations that establish procedures for the protection of information shared and exchanged between FinCEN and the private sector" through the FinCEN Exchange.⁶¹ AMLA does not provide a deadline for the issuance of such regulations.
• Section 6204 of the AMLA requires the Secretary of the Treasury to conduct a formal review of the financial institution reporting requirements relating to currency transactions reports (CTRs) and SARs—and potential prospects for "streamlining requirements" for such reports.⁶² Section 6204(c) of the AMLA requires the Secretary of the Treasury to submit a report to Congress within one year of enactment with the Secretary's findings and determinations, as well as proposed rulemakings.⁶³
• Section 6205 of the AMLA requires the Secretary of the Treasury to review and determine whether the dollar thresholds, including aggregate thresholds, for CTRs and SARs should be adjusted.⁶⁴ Section 6205(c) of the AMLA requires the Secretary of the Treasury to publish a report with the Secretary's findings as well as proposed rulemakings within one year of enactment.⁶⁵ Once every five years during the 10-year period after AMLA's enactment, the Secretary is also required to reevaluate the previous findings and "propose rulemakings, as appropriate, in response to the evaluation required."
• Section 6209 of the AMLA requires the Secretary of the Treasury to "issue a rule to specify ... the standards by which financial institutions are to test the technology and related technology internal processes" for facilitating AML/CFT compliance (e.g., machine learning or other enhanced data analytics processes). AMLA does not provide a deadline for the issuance of such "testing methods rulemaking."⁶⁶
• Section 6314(a) of the AMLA amends 31 U.S.C. §5323 to update AML/CFT-related whistleblower incentives and protections. The amended U.S. Code provision also authorizes the Secretary of the Treasury, in consultation with the Attorney General, to "issue such rules and regulations as may be necessary or appropriate to implement the [updated whistleblower] provisions."⁶⁷ AMLA does not provide a deadline for the issuance of potential rules and regulations.

AMLA Implementation: Reporting Requirements

The following section describes AMLA reporting requirements, some of which have been completed while others remain ongoing or pending.

CTA Reporting Requirements

Pursuant to the CTA, assessment reports on the functioning of the beneficial ownership registry are due one year after the effective date of implementing regulations and annually thereafter for two years.⁶⁸ Moreover, exempt entities are subject to "continuous review" for involvement in "significant abuse relating to money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or any other financial crime."⁶⁹ The CTA additionally requires the Secretary of the Treasury to prepare reports on FinCEN's disclosure of beneficial ownership information to nonfederal law enforcement agencies,⁷⁰ and remediation actions to take in the event of a cybersecurity breach of the beneficial ownership database.⁷¹ It also requires the Inspector General of the Department of the Treasury to submit to Congress periodic reports on external user comments or complaints related to the beneficial ownership information notification and collection process.⁷²

Threat Pattern and Trend Information⁷³

Section 6206 of the AMLA amends 31 U.S.C. §5318(g) to require the FinCEN Director to "publish threat pattern and trend information," including typologies related to "emerging money laundering and terrorist financing threat patterns and trends." Such reports, required by AMLA to be published at least semiannually, are intended to "provide meaningful information about the preparation, use, and value of" BSA reporting by financial institutions. To date, FinCEN has issued two such analytic reports, including Illicit Finance Threat Involving Wildlife Trafficking and Related Trends in Bank Secrecy Act Data (December 20, 2021) and Ransomware Trends in Bank Secrecy Act Data between January 2021 and June 2021 (October 15, 2021).⁷⁴

Review of Regulations and Guidance

Section 6216 of the AMLA requires the Secretary of the Treasury to conduct a formal review of AML/CFT regulations to ensure that "appropriate safeguards" are in place "to protect the financial system from threats," including the continued requirement of certain reports and records that remain "highly useful in countering financial crime."⁷⁵ The review is also to identify regulations and guidance that "may be outdated, redundant, or otherwise do not promote a risk-based" AML/CFT regime for financial institutions, including any regulations and guidance that do not conform to international AML/CFT standards.

The review, containing all findings and determinations, including administrative or legislative recommendations, was due to Congress within one year of AMLA's enactment. Beginning the process of implementing this provision, FinCEN published a request for information (RFI) on December 15, 2021, that sought "comment on ways to streamline, modernize, and update" the U.S. AML/CFT regime in order to "protect U.S. national security in a cost-effective and efficient manner."⁷⁶ FinCEN received 140 comments on its RFI.⁷⁷

Other Treasury Department Reporting Requirements

In addition to the AMLA provisions discussed above, AMLA contains other reporting provisions requiring the Secretary of the Treasury or the FinCEN Director to submit various reports to Congress. Some of these reporting requirements have been delegated to FinCEN or other organizational units within Treasury, such as the Office of Terrorist Financing and Financial Crimes (TFFC). Moreover, some of these reports may not have been issued publicly and may have instead been specifically provided to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services.

• Section 6103 of the AMLA amends 31 U.S.C. §310 to require the Secretary of the Treasury to submit reports to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services on efforts undertaken by the FinCEN Exchange. The first report was due within one year of AMLA's enactment and once every two years thereafter for the next five years.⁷⁸
• Section 6105(c) of the AMLA requires the Secretary of the Treasury to submit reports to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services on the use of special hiring authorities for FinCEN and Office of Terrorism and Financial Intelligence personnel. The first report was due within one year of AMLA's enactment and once every two years thereafter for the next five years.⁷⁹
• Section 6107 of the AMLA amends 31 U.S.C. §310 to require the FinCEN Director to submit reports to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services on the next-year objectives of the AMLA-created Office of Domestic Liaison and past-year activities. The first report was due within one year of AMLA's enactment and once every two years thereafter for the next five years.⁸⁰
• Section 6110(c) of the AMLA requires the Secretary of the Treasury to "perform a study on the facilitation of money laundering and the financing of terrorism through the trade in works of art."⁸¹ The report was due to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services within 360 days of AMLA's enactment.⁸²
• Section 6111 of the AMLA requires the Secretary of the Treasury to submit reports to Congress on technical assistance, including assistance to promote compliance with international AML/CFT standards and best practices, provided by the Treasury Department's Office of Technical Assistance. The first report was due within one year of AMLA's enactment and once every two years thereafter for the next five years.⁸³
• Section 6210 of the AMLA requires the Secretary of the Treasury to submit a report to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services that assesses "the impact of financial technology on financial crimes compliance, including with respect to money laundering, the financing of terrorism, proliferation finance, serious tax fraud, trafficking, sanctions evasion, and other illicit finance."⁸⁴ The report was due within one year of AMLA's enactment.
• Section 6215(b) of the AMLA requires the U.S. Government Accountability Office (GAO) to conduct an analysis of financial services "de-risking"—the concern that AML/CFT and sanctions-related compliance decisionmaking may have the unintended consequence of reducing financial services access to nonprofit and international development organizations carrying out humanitarian activities in high-risk jurisdictions. In turn, Section 6215(c) requires the Secretary of the Treasury to undertake a formal review and submit a report to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services that includes "a strategy to reduce de-risking and adverse consequences related to de-risking."⁸⁵
• Section 6506 of the AMLA requires the Secretary of the Treasury to submit to Congress a report on trade-based money laundering (TBML) and proposed strategies to combat TBML. The report was due within one year of AMLA's enactment.⁸⁶
• Section 6507 of the AMLA requires the Secretary of the Treasury to submit to Congress a report on Chinese money laundering and a strategy to counter such laundering activity. The report was due within one year of AMLA's enactment.
• Section 6508 of the AMLA requires the Secretary of the Treasury to study and submit to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services a report on the efforts of authoritarian regimes to exploit the U.S. financial system and recommendations for legislative, regulatory, or U.S. financial institution action to address such exploitation.⁸⁷ The report is due within two years of AMLA's enactment.

Selected Issues for Congress

In conducting oversight and contemplating further legislative reforms to the U.S. AML framework, Congress may consider several key areas of AMLA implementation, including (1) challenges in meeting AMLA implementation deadlines, (2) FinCEN funding for AMLA implementation, (3) the status of beneficial ownership rulemaking and establishing a beneficial ownership registry, (4) the law enforcement implications of AMLA implementation, and (5) pending bills related to FinCEN, the BSA and AML/CFT policy.

Challenges in Meeting AMLA Implementation Deadlines

Congressional oversight of AMLA implementation may continue to focus on whether FinCEN can meet the statutory deadlines for regulatory activity and reporting requirements. AMLA implementation deadlines were a critical topic of concern during the April 28, 2022 hearing with Acting FinCEN Director Das, held by the House Committee on Financial Services. Further delays may raise questions regarding FinCEN's ability or willingness to prioritize AMLA implementation.

According to Acting FinCEN Director Das, a lack of resources has been the driving factor hampering the agency's ability to fully comply with AMLA's requirements:

Timely and effective implementation of the AML Act is our top priority.... It's important that we get it done right and we get it done quickly. We've accomplished a lot, but we also recognize that we need to do more. As you are aware, we are missing deadlines. And to be blunt, we will likely continue to do so because ... our budget situation has required us to make significant trade-offs among competing priorities.⁹¹

FinCEN reports that funding shortfalls for AMLA implementation have particularly limited its ability to comply with AMLA's requirements, including to establish domestic and international FinCEN liaisons and other new staffing requirements.⁹² In the same April 2022 testimony, Acting FinCEN Director Das further asserted that limited resources are also slowing the agency's efforts to implement AMLA's whistleblower provisions (including staffing a new Office of the Whistleblower, reviewing tips and referring appropriate matters for investigation, and drafting regulations to further enhance the program).⁹³ As of FY2022, FinCEN maintained a staff of less than 300 full-time equivalent positions, including support staff—a staffing level that some observers indicate may challenge the agency from effectively achieving its broad and arguably growing mandate.⁹⁴

FinCEN Funding for AMLA Implementation

Section 6509 of AMLA authorizes appropriations for AMLA implementation. Specifically, AMLA authorizes the following amounts for FinCEN:

• $136 million for FY2021;
• $60 million for FY2022;
• $35 million annually for FY2023-2026; and
• "such sums as may be necessary" to carry out the beneficial ownership information reporting requirements under 31 U.S.C. §5336 for each of the three fiscal years beginning on the effective date of beneficial ownership regulations required by AMLA.

As part of its annual appropriations activity, Congress may consider FinCEN's requests for funding to facilitate AMLA implementation.⁹⁵

• For FY2021, the Treasury Department estimated that the minimum amount of new FinCEN funding necessary to implement AMLA, including the CTA, would be $74.3 million; Congress, however, did not appropriate Treasury's requested supplemental funding for AMLA implementation in FY2021.⁹⁶
• For FY2022, the President's annual budget request included approximately $190.5 million for FinCEN—of which FinCEN requested $60.3 million specifically for AMLA implementation, including funding for 80 full-time equivalent (FTE) positions to implement AMLA.⁹⁷
• For FY2023, the President's annual budget request included approximately $210.3 million for FinCEN—of which FinCEN requested $46.4 million specifically for AMLA implementation, including funding for 115 FTE positions to implement AMLA.⁹⁸

Appropriated funding for FinCEN in FY2022, which does not specify what proportion of total FinCEN funding should be allocated to AMLA implementation, fell short of the President's budget request. Congress appropriated funding to FinCEN in the Consolidated Appropriations Act, 2022 (P.L. 117-103). Division E of the act, the Financial Services and General Government Appropriations Act, 2022, provided FinCEN with a total of $161.0 million—up from approximately $127.0 million appropriated in FY2021, but below the Administration's $190.5 million budget request for FY2022.⁹⁹

According to the Joint Explanatory Statement accompanying FY2022 appropriations, the act "includes funds for FinCEN to develop and maintain a national beneficial ownership database, and for staffing and support costs to implement and enforce the other new requirements" associated with AMLA, including the CTA.¹⁰⁰ FinCEN, however, has indicated that FY2022 appropriations provided funding for approximately four of the 80 requested FTE positions.¹⁰¹ Another source of funds for CTA implementation has been the Treasury Forfeiture Fund (TFF), administered by the Treasury Executive Office for Asset Forfeiture (TEOAF).¹⁰² TEOAF Strategic Support obligations for FY2021-2023 are supporting the initial development costs for the establishment of a FinCEN information technology (IT) platform to securely collect, process, store, and disseminate beneficial ownership information in a system to be known as the Beneficial Ownership Secure System (BOSS).¹⁰³

Congress is considering FY2023 appropriations for FinCEN. On June 28, 2022, the House Committee on Appropriations reported the Financial Services and General Government Appropriations Bill, 2023 (H.Rept. 117-393, accompanying H.R. 8254). With respect to FinCEN funding, the committee recommended that FinCEN receive the full amount requested in its FY2023 budget request (approximately $210.3 million).

The Committee strongly supports the critical work performed by the Department of the Treasury in combating terrorist financing and money laundering. The enactment of the Anti-Money Laundering Act and Corporate Transparency Act in early 2021 represented the first comprehensive revision to anti-money laundering and countering the financing of terrorism law in nearly 20 years.¹⁰⁴

H.Rept. 117-393 further noted

The recommendation supports FinCEN's continued implementation of the provisions of the Anti-Money Laundering Act of 2020 (AMLA). Within AMLA, the Corporate Transparency Act (CTA) includes requirements for corporations, limited liability companies, and similar entities, to report on the beneficial ownership of these entities, and for FinCEN to develop a system to collect and secure this information. Once fully implemented, these actions will help protect the U.S. financial system from money laundering and other illicit financial exchanges and make it harder for bad actors, including Russian oligarchs, to evade oversight and conceal proceeds of corrupt acts using shell companies and other legal entities.... Further, the Committee urges FinCEN and the Department to proceed expeditiously to complete the rulemaking and other requirements in order to fully implement the mandates of AMLA/CTA.¹⁰⁵

Status of Beneficial Ownership Rulemaking and Registry

As noted above, FinCEN remains in the early stages of CTA implementation. When Acting FinCEN Director Das was asked directly during the April 28, 2022 House Financial Services Committee hearing about when the beneficial ownership database would be ready, Das said, "I do not have a timeline for the establishment of the database."¹⁰⁶ To accomplish this new collection of beneficial ownership information, FinCEN asserts it would need to invest more heavily in its information technology (IT) platform, which, as FinCEN describes, will be "the foundational architecture for the CTA beneficial ownership system."¹⁰⁷ In FY2021 and FY2022, FinCEN has reportedly invested approximately $37.4 million on the development of BOSS, drawing from a combination of TEOAF Strategic Support and appropriated funds.¹⁰⁸

Some observers have contended that the future success of the U.S. beneficial ownership registry may depend on how accessible it is to parties who require the information. Some have suggested that while the CTA is clear on prohibiting public access to this information, FinCEN may have some discretion in upcoming rulemakings regarding how much access to grant to financial institutions, which could help them conduct customer due diligence.

In a March 2, 2022, letter to Secretary of the Treasury Janet Yellen and FinCEN Acting Director Das, Ranking House Financial Services Committee Member Patrick McHenry and Ranking House Committee on Small Business Member Blaine Luetkemeyer cautioned against efforts to expand the CTA's mandate.¹⁰⁹ The status of CTA implementation—including how much access to beneficial ownership data will be allowed under future FinCEN rulemaking—remained a major issue of debate during the April 2022 House Financial Services Committee hearing.¹¹⁰ Although some Members lauded the progress FinCEN has been able to make to date toward establishing the beneficial ownership registry and other AMLA requirements, others criticized the ongoing rulemaking process.¹¹¹

Law Enforcement Implications for AMLA Implementation

AMLA provides U.S. law enforcement with several potentially powerful tools for combating money laundering. Various observers have commented on the potential for several such provisions to improve U.S. enforcement of BSA violations, including provisions to increase BSA penalties, strengthen whistleblower incentives, combat corruption, and expand subpoena powers for obtaining foreign bank records.¹¹² As AMLA implementation continues, more observers, as well as Members of Congress, may focus on questions related to how AMLA is improving U.S. efforts to investigate and prosecute financial crimes in practice. The practical effect of AMLA provisions on law enforcement outcomes has implications for the success of other U.S. policy initiatives, including counternarcotics.¹¹³

As enacted, AMLA directs the Attorney General to play a key consultative role in the implementation of many of its provisions and requires the Attorney General to prepare certain reports—although not all such reports are required to be submitted to Congress. One annual reporting requirement, for example, requires the Attorney General to report to the Secretary of the Treasury on law enforcement use of BSA financial intelligence data (§6201). Congress may seek further information directly from the Department of Justice and other federal agencies to evaluate the measurable impact of AMLA's implementation in terms of law enforcement outcomes in prosecuting money laundering and other BSA violations, as amended or added by AMLA.

Selected Legislation in the 117^th Congress

In addition to AMLA implementation, there is congressional interest in further amending the U.S. AML/CFT framework through legislation. While such congressional activity reflects the ongoing view of some observers that the U.S. AML/CFT regime requires further improvement, others may caution that enactment of additional measures could further challenge FinCEN's ability to implement AMLA and achieve other strategic objectives.

The House-passed National Defense Authorization Act for Fiscal Year 2023 (H.R. 7900; FY2023 NDAA), for example, includes provisions on financial services matters (Title LIV, §§5401-5475). Included in the House-passed FY2023 NDAA is the Establishing New Authorities for Businesses Laundering and Enabling Risks to Securities Act (ENABLERS Act; see also H.R. 5525), which, among other provisions, seeks to subject certain non-bank professional service providers ("gatekeepers") to AML/CFT compliance requirements. Section 5415 of the House-passed FY2023 NDAA would also amend and expand FinCEN's authority to apply a new special measure prohibiting or setting conditions on certain transmittals of funds involving a foreign jurisdiction or financial institution "of primary money laundering concern" (see also H.R. 7128, Special Measures to Fight Modern Threats Act).¹¹⁴

Potentially reflecting a desire for increased congressional oversight and accountability on AML/CFT matters and FinCEN's role, the Financial Crimes Enforcement Network Improvements Act (H.R. 7623), among other provisions, seeks to require the President to appoint the FinCEN Director and the Senate to confirm the appointment. Other bills in the 117^th Congress, which, if enacted, could affect FinCEN, the BSA, and/or AML/CFT policy implementation include the: Timely Delivery of Bank Secrecy Act Reports Act (H.R. 7734, which passed the House); FinCEN Exam Delegation Study (H.R. 6328); Financial Crimes Enforcement Network Exchange Improvement Act (H.R. 5320); Nowhere to Hide Oligarchs' Assets Act (H.R. 7080); Protecting Financial Privacy Act of 2021 (H.R. 5451); Digital Asset Market Structure and Investor Protection Act (H.R. 4741); and Gun Violence Prevention Through Financial Intelligence Act (H.R. 5764 and S. 3117).