It is rare these days for Republicans and Democrats to agree on political priorities – another profound grasp of the obvious. Recently, on Capitol Hill there appears to be some common ground on the issue of reforming AML laws and regulations.
The motivation is to make financial AML regulations “smarter” and increase focus on beneficial ownership, terrorist financing and proactive detection of money laundering. Some of the AML requirements and reporting rules have lost focus on these important priorities.
Two significant issues have been identified: (1) reporting requirements for transactions over $10,000 and (2) the filing of Suspicious Activity Reports. Banks and law enforcement agree that many of the filings above the $10,000 threshold and in SARs are not helpful to law enforcement. In response to money laundering and terrorist financing threats, the number of filings required by banks has steadily increased with no firm finding that such filings have directly resulted in increased enforcement. In fact, banks have suggested that the system is so complex and poorly coordinated that law enforcement’s ability to identify and target investigations has been hindered.
For example, the $10,000 threshold for reporting cash transactions was adopted in the 1970s. There is a need to increase that figure, and some have suggested setting a new threshold at $30,000.
Also, with respect to filing of SARs, most banks, out of concern that they may fail to file a required SAR, file SARs in situations when the filing is not required. The banks know that regulators will review their SARs filings and often second-guess these determinations.
In the case of the new beneficial ownership regulations that are effective in May 2018, some have floated the idea of having FinCEN create a national database of beneficial ownership information, mandating that company’s register themselves with federal regulators and not just state incorporation authorities. While banks are complaining about the burden of beneficial ownership regulations, I do not expect Congress to modify this requirement. Rather, the politicians floating this idea appear to be giving banks another shot to argue against the beneficial ownership regulations. The United States is far behind other countries on requiring beneficial ownership disclosures, and consequently the amount of money laundering through hidden accounts in the US is much higher than it should be.
Banks have also sought additional guidance from law enforcement and regulators on AML compliance requirements. The specific breakdown in communication and information sharing has been between law enforcement and regulators. In many cases, banks have explained that the regulatory framework and specific requirements does not match law enforcement’s priorities and need for information, resulting in AML regulatory requirements that do not advance law enforcement’s ability to focus on the more serious financial crimes or terrorist financing schemes.
Law enforcement is sure to oppose any major revisions to the AML system and its voice is an important factor to consider in any regulatory modification. However, there is nothing wrong with banks, regulators and law enforcement working to come up with practical improvements to the regulatory and reporting system.
Community banks have raised complaints about regulatory burdens and the amount of time and expense devoted to AML compliance. Again, the community banks have suggested that they are not able to design a truly risk-based AML compliance program because of the fear that regulators will second guess such determinations when conducting supervisory reviews of their operations.
This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.
Michael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services. He can be reached at 
