House bill

Revised US Bill Establishes AML Rules for Professional Services ‘Gatekeepers’ | Thomson Reuters Regulatory watch and compliance learning

Revised ENABLERS Act would bring anti-money laundering control and new requirements to guardians of professional services such as lawyers and accountants

Legislation passed by the U.S. House of Representatives seeks to impose anti-money laundering (AML) requirements on so-called “access control” activities such as legal and accounting services, while omitting some occupations targeted in an earlier version.

The bill would also require the US Treasury to specify exactly who is covered and what is required of them.

Last month, the House passed the New Business Laundering and Security Risk Enforcement Authorities Act (ENABLERS) as part of its version of the National Defense Authorization Act ( NDAA) for fiscal year 2023.

Given that the vital NDAA is historically passed by Congress each year to authorize defense spending, the inclusion of the ENABLERS Act in the House package is seen by many as a major step toward imposing anti-defense obligations. -first-time money laundering to professional service providers who serve as key gatekeepers within the US financial system, including certain lawyers and accountants, investment advisers, and persons who form or register companies or trusts.

Indeed, the ENABLERS Act is likely to survive the Senate and be passed by Congress, thanks in large part to the support it has garnered from Republicans, according to several veteran anti-money laundering experts. However, following the announcement of the House’s passage of the ENABLERS Act, AML experts quickly noted significant changes to the legislation that had not previously been made public.

The evolution of a high-profile bill

In October 2021, a bipartisan group presented for the first time the Catalysts Actwhich sparked the Pandora Papers – investigative revelations into how 14 ‘offshore’ service companies helped wealthy people and corrupt politicians hide their money.

The law was originally intended to require comprehensive anti-money laundering programs for seven clearly defined groups, including: investment advisers; art, antique and collectibles dealers; lawyers “involved in financial activity on behalf of others”; trust or company service providers; accountants; PR firms that “provide another person with anonymity or denial”; and third party payment providers.

While the first defense bill 2023 (HR7900) included the same list in its version of the law and made no exceptions to the requirements for comprehensive AML programs and suspicious activity reporting, the version of the ENABLERS law which was part of the House’s final NDAA included several fundamental changes.

NDAA Section 5401 is now called the STOP Dirty Money Act (Services That Open Portals to Dirty Money), while retaining the ENABLERS Act as its “short title”.

“It is convoluted and specifically mentions trust or corporate service providers, third-party payment providers, some legal services and some accounting services – so that leaves four of the (original) seven (targeted professions),” says Jim Richards, head of RegTech Consulting and a leading expert on anti-money laundering issues in the United States. Professions removed from the bill include investment advisers, art dealers and public relations firms.

Guardian layout

The version passed by the House includes requirements for addressing “gatekeepers” within the U.S. financial system, giving the Treasury Department no more than one year after the date of enactment to determine which people fall under that definition and prescribe the requirements. appropriate in the fight against money laundering.

The Treasury’s AML office, the Financial Crimes Enforcement Network (FinCEN), would be responsible for this work and would be required to target anyone involved in:

  • the formation or registration of (or the acquisition or disposal of) an interest in a corporation, limited liability company, trust, foundation, limited liability partnership, partnership or any other similar entity;
  • provide a registered office, address or accommodation, correspondence or administrative address for the aforementioned entities;
  • act as a nominee shareholder for another person or cause another person to act as a nominee shareholder for another person;
  • manage, advise or consult on money or other assets;
  • processing payments, providing safekeeping services or transferring money;
  • the exchange of foreign currency, digital currency or digital assets; and
  • The provision, pooling, organization or management of capital in association with the formation, operation, management or investment of a company, limited liability company, trust, foundation, limited liability company, partnership or other similar entity.

This list seems to suggest that investment advisers will eventually be forced to adopt AML measures of an undefined type, but there are a number of quirks to be clarified, says Richards. “I don’t know what types of businesses it covers, but it sounds complex.”

Unlike the original ENABLERS Act, the bill passed by the House gives FinCEN flexibility in the types of requirements it can impose on monitors, ranging from establishing AML programs and reporting regimes. suspicious activities, to less onerous obligations, such as creating due diligence policies. .

However, the bill states that FinCEN “shall not delay enforcement of any requirement described in this subchapter for any person described in the section,” an apparent attempt to chastise FinCEN for historically delaying implementation. AML rules for investment advisers, real estate professionals and third-party payment processors, experts say.

Anti-corruption advocates happy with House bill

The fact that the ENABLERS Act — seen by many as legislation that would finally clamp down on major conduits of corruption and other dirty money flows in the United States — passed the House with an apparent impetus to clean up the Senate is a welcome development for anti-corruption advocacy groups.

Scott Greytak, advocacy director for Transparency International US, says Russia’s war in Ukraine and revelations from the Pandora Papers and other investigative reporting firms have shed light on the role Guardians play in helping the movement of dirty money in the American financial system. . “This is the most significant anti-money laundering and anti-corruption law passed since 9/11, and it responds to the immediate moment of being able to track, detect and prevent dirty money from entering the country. “, said Greytak.

In the coming months, the Senate is expected to adopt its own version of the NDAA and is expected to agree in a conference committee with the House on the terms of the final bill. “I think we can also expect significant bipartisan support for the ENABLERS Act in the Senate, and I think it has a very good chance of sticking through the conference and into the final bill,” Greytak adds.

The bottom line

While a version of the ENABLERS Act will likely be signed into law by Congress, the precise wording of the legislation may be far from final and lobbyists will likely be lining up to push back against FinCEN’s proposed rules.

Still, the industries and professions named — or in some cases vaguely alluded to — in the House bill would be wise to begin weighing comments to submit to FinCEN during the rulemaking process. They may also wish to begin planning for due diligence requirements and potentially other AML obligations that may be in their future.

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