Covered Companies Must Report Beneficial Ownership to National Database Upon Incorporation

First Blog Post in an Extended Series on Legislative Changes to BSA/AML Regulatory Regime

Change is upon us.  The U.S. House and Senate have passed – over a Presidential veto – the National Defense Authorization Act (“NDAA”), a massive annual defense spending bill.  As we have blogged, this bill, now law, contains historic changes to the Bank Secrecy Act (“BSA”), coupled with other changes relating to money laundering, anti-money laundering (“AML”), counter-terrorism financing (“CTF”) and protecting the U.S. financial system against illicit foreign actors. This sweeping legislation will affect financial institutions, their clients, and law enforcement and regulators for many years.  This will be the first post of many on these important legislative changes, which should produce related regulatory pronouncements throughout 2021.

Today, we will focus on the enactment that has received the most attention:  the NDAA’s adoption of the Corporate Transparency Act (“CTA”) and its requirements for covered legal entities to report their beneficial owners at the time of their creation to a database accessible by U.S. and foreign law enforcement and regulators, and to U.S. financial institutions seeking to comply with their own AML compliance obligations.  The issue of beneficial ownership and the misuse of shell corporations has been at the heart of global AML regulation and enforcement for many years.  This legislation will be held out as a partial but important response to the continuing critiques by the international community of the United States as a haven for money laundering and tax evasion, often due to the perception that U.S. and state laws on beneficial ownership reporting are lax.

Beyond “just” the CTA, the breadth of the BSA/AML legislation is substantial. We have discussed BSA/AML reform for years, and many of the reforms (acknowledging that the word “reform” often involves a value judgment, and whether a particular change represents “reform” is typically in the eye of the beholder) that have been repeatedly bandied about by Congress, industry, think tanks and law enforcement are incorporated into this legislation, or at least referenced as topics for further study and follow-up.  We therefore will be blogging repeatedly on the many and various components of this legislation, which implicates a broad array of key issues: BSA/AML examination priorities; attempting to modernize the BSA regulatory regime, including by improving feedback by the government on the usefulness of SAR reporting; potential “no action” letters by FinCEN; requiring process-related studies tied to the effectiveness and costs of certain BSA requirements, including current SAR and CTR reporting; increased penalties under the BSA for repeat offenders; greater information sharing among industry and the government; enhancing the ability of the government to investigate the use of correspondent bank accounts; cyber security issues; focusing on trade-based money laundering; adding a whistleblower provision to the BSA; and including dealers in antiquities to the definition of “financial institutions” covered by the BSA. Continue Reading U.S. Passes Historic BSA/AML Legislative Change

Farewell to 2020.  Although it was an extremely difficult year, let’s still look back — because 2020 was yet another busy year in the world of money laundering and BSA/AML compliance.

We are highlighting 12 of our most-read blog posts from 2020, which address many of the key issues we’ve examined during the past year — financial institution scandals; fraud relating to the COVID-19 pandemic and the Paycheck Protection Program; beneficial ownership and shell companies; BSA/AML reform; cryptocurrency; cannabis; money laundering prosecutions; the use of art, real estate and other high-end assets to launder illicit proceeds; the role of professionals in money laundering schemes; civil lawsuits arising from alleged AML failures; and broad policy and social questions implicated by AML concerns, including human trafficking and the illegal wildlife trade.

We move on to 2021, which hopefully will be a better year for many.  2021 certainly will be an important and interesting year for BSA/AML and money laundering issues, particularly given the passage on New Year’s Day, over a Presidential veto, of massive and historic legislative change to the Bank Secrecy Act.  The true consequences of this legislation will unfold over time, but it inevitably will impact significantly financial institutions, compliance departments, executives, professionals, regulators and law enforcement for many years.  We look forward to keeping you informed throughout 2021 on these and other developments.

We also want to thank our many readers around the world who continue to make this blog such a success. The feedback we receive from financial industry professionals, compliance officers, in-house and external lawyers, BSA/AML consultants, government personnel, journalists, and others interested in this field is invaluable, and we hope you will continue to share your perspectives with us.  We pride ourselves on providing in-depth discussions of the important developments in this ever-evolving area.

We also would like to thank the other platforms that host our blog: Money Laundering BulletinDigital Currency & Ledger Defense Coalition, and Federal Tax Crimes.

If you would like to subscribe to Money Laundering Watch, please click here. To learn more about Ballard Spahr’s Anti-Money Laundering Team, please click here.

Providing yet more proof that anything positive can be twisted into something negative, the Financial Crimes Enforcement Network (“FinCEN”) released a Notice yesterday “to alert financial institutions about the potential for fraud, ransomware attacks, or similar types of criminal activity related to COVID-19 vaccines and their distribution.”  This Notice comes on the heels of several similar advisories issued by FinCEN throughout 2020 regarding medical scams relating to COVID-19; cybercrimes relating to COVID-19; unemployment insurance fraud relating to COVID-19; imposter and money mule schemes relating to COVID-19; and the use of the financial system to facilitate cybercrime and ransomware payments.  The Notice is short, so we simply quote most of it here:

. . . . As of December 28, 2020, the U.S. Food and Drug Administration (FDA) has issued two emergency use authorizations for COVID-19 vaccines in the United States. . . .

COVID-19 vaccine fraud may include the sale of unapproved and illegally marketed vaccines, the sale of counterfeit versions of approved vaccines, and illegal diversion of legitimate vaccines. Already, fraudsters have offered, for a fee, to provide potential victims with the vaccine sooner than permitted under the applicable vaccine distribution plan.

In addition, cybercriminals, including ransomware operators, will continue to exploit the COVID-19 pandemic alongside legitimate efforts to develop, distribute, and administer vaccines. FinCEN is aware of ransomware directly targeting vaccine research, and FinCEN asks financial institutions to stay alert to ransomware targeting vaccine delivery operations as well as the supply chains required to manufacture the vaccines. Financial institutions and their customers should also be alert to phishing schemes luring victims with fraudulent information about COVID-19 vaccines.

The Notice finished by providing specific instructions for filing Suspicious Activity Reports, or SARs, regarding suspicious activity related to COVID-19 vaccines and their distribution.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch.  To learn more about Ballard Spahr’s Anti-Money Laundering Team, please click here.

On December 18, the Financial Crimes Enforcement Network (“FinCEN”) issued a proposal to impose on banks and money service businesses (“affected institutions”) a new set of rules for digital currency transactions involving “unhosted” digital asset wallets (i.e., wallets that are not provided by a financial institution or other service and reside instead on a user’s personal device or offline).  The proposed rule states that, for the purposes of these new requirements only, the definition of “monetary instruments” at 31 U.S.C. § 5312(a)(3) would be expanded to include convertible virtual currency and digital assets with legal tender status.  If adopted, the rule will create significant obligations for recordkeeping, reporting, and identity verification requirements. Continue Reading FinCEN Proposes New Rule for “Unhosted” Virtual Currency Wallets

On December 18, 2020, the Office of the Comptroller of the Current (OCC), Federal Reserve Board (FRB), and Federal Deposit Insurance Corporation (FDIC) announced an interagency notice of proposed rulemaking that would require supervised banking organizations to provide notification of significant computer security incidents to their primary federal regulator.  Under the proposed rule, for incidents that could result in a banking organization’s inability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of a banking organization, or impact the stability of the financial sector, the banking organization must notify its primary federal regulator no later than 36 hours after determining an incident has occurred.  Additionally, service providers to banking organizations would be required to notify at least two individuals at affected banking organization customers immediately after the bank service provider experiences a computer-security incident that it believes in good faith could disrupt, degrade, or impair services provided for four or more hours.

By requiring notice of these computer security incidents, the proposed rule broadens the type of reportable events that banking organizations and their service providers are required to report to federal agencies.  The agencies stated that, “current reporting requirements related to cyber incidents are neither designed nor intended to provide timely information to regulators regarding such incidents.”  Specifically, the agencies noted that the filing of Suspicious Activity Reports under the Bank Secrecy Act do not provide the agencies with sufficiently timely information about every notification incident, and notices under the Gramm-Leach-Bliley Act focus on incidents that result in the compromise of sensitive customer information and do not include the reporting of incidents that disrupt operations.

Comments on the proposal must be received within 90 days of publication in the Federal Register.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team. Please also visit CyberAdviser, our blog focused on the latest news and developments in privacy and cybersecurity law, produced by the members of our Privacy and Data Security Group.


Businessmen whisperingOn December 10, 2020, Kenneth Blanco, Director of FinCEN, issued public comments at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference announcing new FinCEN guidance for covered financial institutions to utilize the voluntary information sharing provisions of section 314(b) of the USA Patriot Act (“Guidance”). The Guidance encourages information sharing under section 314(b) and emphasizes the potential breadth of the provision, which protects compliant financial institutions from civil liability. Continue Reading FinCEN Provides New Guidance on Section 314(b) Information Sharing

We are very pleased to announce that Ballard Spahr has unveiled its cannabis practice.  Businesses in this fast-changing industry face unique issues and require smart, strategic advisers. Ballard Spahr has a national team of experienced attorneys who assist at each step along the way.

As more states legalize cannabis for both medical and recreational use, the lawyers in our cannabis practice are helping businesses in the cannabis industry gear up not only to seize, but to help create opportunities presented by this growth trend.  We cover the full range of cannabusiness issues, from entity formation, capitalization, and transactions to banking, employment, and government advocacy—a key area in states where the focus now turns to regulation and implementation.

We have advised growers, dispensaries, technology companies, researchers and investors on a variety of regulatory, licensing, corporate, financing, intellectual property, and other legal issues. Combining our knowledge of the industry and regulatory landscape with our business acumen and experience in other heavily regulated industries, we work with cannabis-industry clients to establish viable, compliant business models that achieve their goals.

And, of course, we advise financial institutions which are working with, or are contemplating working with, businesses operating directly or indirectly in the cannabis industry — a topic on which we have blogged repeatedly.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. To learn more about Ballard Spahr’s Anti-Money Laundering Team, please click here.


On December 3, the U.S. House and Senate Armed Services Committees reached an agreement on the National Defense Authorization Act (“NDAA”), an annual defense spending bill.  Within this huge bill (well over 4,500 pages) are widespread changes to the Bank Secrecy Act (“BSA”), coupled with other related changes dealing with money laundering, anti-money laundering (“AML”), counter-terrorism financing (“CTF”) and foreign corruption in general.  It’s hard to overstate the breadth of the BSA/AML legislation, at least in terms of the sheer amount of provisions and detail.  We have discussed BSA/AML reform for years, and major portions of proposed legislation on which we have blogged — specifically, the Corporate Transparency Act (“CTA”), the ILLICIT CASH Act, and the Kleptocracy Asset Recovery Rewards Act — are all included within the NDAA.  But, there is a catch:  the NDAA is not yet law, and although the full House and Senate are expected to vote on and pass the NDAA this week, President Trump has threatened to veto the NDAA because it does not repeal provisions of the 1996 Telecommunications Act which shield tech companies from civil liability related to content posted by their users.

If the NDAA is signed into law, we will blog repeatedly on its various components, many of which deserve their own particular attention, and which will have a major impact on many financial institutions and their customers.  Although the change that has (appropriately) received the most attention is the CTA’s requirement for the reporting of beneficial ownership to a national database by entities at the time of their creation, the NDAA includes a huge array of other changes, including expanding the stated purpose of the BSA (which will have ripple effects on future regulation and examination priorities); requiring numerous process-related studies tied to the effectiveness and costs of certain BSA requirements, including SAR and CTR reporting (many of these studies may lead to additional, future substantive regulation or legislation); enhancing penalties under the BSA for repeat offenders; provisions designed to enhance information sharing; adding a whistleblower provision to the BSA; and including dealers in antiquities to the definition of “financial institutions” covered under the BSA (and requiring an assessment of also including art dealers within that definition).

Because the fate of the NDAA is unclear, this post simply will list below the sections pertaining to the BSA, AML, CTF, money laundering and foreign corruption.  The list speaks for itself as to the breadth of what may be coming very soon.  Although this blog does not purport to make political predictions, it’s hard to imagine that there would not be bipartisan support in Congress to override any veto and pass into law the necessary spending bill for the nation’s armed forces.  So please stay tuned.

Title LXI—Strengthening Treasury Financial Intelligence, Anti-Money Laundering, and Countering the Financing of Terrorism Programs

Sec. 6101. Establishment of national exam and supervision priorities.

Sec. 6102. Strengthening FinCEN.

Sec. 6103. FinCEN Exchange.

Sec. 6104. Interagency anti-money laundering and countering the financing of terrorism personnel rotation program.

Sec. 6105. Terrorism and financial intelligence special hiring authority.

Sec. 6106. Treasury Attaché program.

Sec. 6107. Establishment of FinCEN Domestic Liaisons.

Sec. 6108. Foreign Financial Intelligence Unit Liaisons.

Sec. 6109. Protection of information exchanged with foreign law enforcement and financial intelligence units.

Sec. 6110. Bank Secrecy Act application to dealers in antiquities and assessment of Bank Secrecy Act application to dealers in arts.

Sec. 6111. Increasing technical assistance for international cooperation.

Sec. 6112. International coordination.

Title LXII—Modernizing the Anti-Money Laundering and Countering the Financing of Terrorism System

Sec. 6201. Annual reporting requirements.

Sec. 6202. Additional considerations for suspicious activity reporting requirements.

Sec. 6203. Law enforcement feedback on suspicious activity reports.

Sec. 6204. Streamlining requirements for currency transaction reports and suspicious activity reports.

Sec. 6205. Currency transaction reports and suspicious activity reports thresholds review.

Sec. 6206. Sharing of threat pattern and trend information.

Sec. 6207. Subcommittee on Innovation and Technology.

Sec. 6208. Establishment of Bank Secrecy Act Innovation Officers.

Sec. 6209. Testing methods rulemaking.

Sec. 6210. Financial technology assessment.

Sec. 6211. Financial crimes tech symposium.

Sec. 6212. Pilot program on sharing of information related to suspicious activity reports within a financial group.

Sec. 6213. Sharing of compliance resources.

Sec. 6214. Encouraging information sharing and public-private partnerships.

Sec. 6215. Financial services de-risking.

Sec. 6216. Review of regulations and guidance.

Title LXIII—Improving Anti-Money Laundering and Countering the Financing of Terrorism Communication, Oversight, and Processes

Sec. 6301. Improved interagency coordination and consultation.

Sec. 6302. Subcommittee on Information Security and Confidentiality.

Sec. 6303. Establishment of Bank Secrecy Act Information Security Officers.

Sec. 6304. FinCEN analytical hub.

Sec. 6305. Assessment of Bank Secrecy Act no-action letters.

Sec. 6306. Cooperation with law enforcement.

Sec. 6307. Training for examiners on anti-money laundering and countering the financing of terrorism.

Sec. 6308. Obtaining foreign bank records from banks with United States correspondent accounts.

Sec. 6309. Additional damages for repeat Bank Secrecy Act violators.

Sec. 6310. Certain violators barred from serving on boards of United States financial institutions.

Sec. 6311. Department of Justice report on deferred and non-prosecution agreements.

Sec. 6312. Return of profits and bonuses.

Sec. 6313. Prohibition on concealment of the source of assets in monetary transactions.

Sec. 6314. Updating whistleblower incentives and protection.

Title LXIV—Establishing Beneficial Ownership Information Reporting Requirements

Sec. 6401. Short title.

Sec. 6402. Sense of Congress.

Sec. 6403. Beneficial ownership information reporting requirements.

Title LXV—Miscellaneous

Sec. 6501. Investigations and prosecution of offenses for violations of the securities laws.  [Editor’s note:  this does not pertain to the BSA.  Rather, this is a Congressional reaction to the Supreme Court opinions in Liu v. SEC and Kokesh v. SEC, which pertained to the ability of the Securities and Exchange Commission to obtain “disgorgement” in certain cases.]

Sec. 6502. GAO and Treasury studies on beneficial ownership information reporting requirements.

Sec. 6503. GAO study on feedback loops.

Sec. 6504. GAO CTR study and report.

Sec. 6505. GAO studies on trafficking.

Sec. 6506. Treasury study and strategy on trade-based money laundering.

Sec. 6507. Treasury study and strategy on money laundering by the People’s Republic of China.

Sec. 6508. Treasury and Justice study on the efforts of authoritarian regimes to exploit the financial system of the United States.

Sec. 6509. Authorization of appropriations.

Sec. 6510. Discretionary surplus funds.

Sec. 6511. Severability.

Title XCVII—Financial Services Matters

Subtitle A—Kleptocracy Asset Recovery Rewards Act

Sec. 9701. Short title.

Sec. 9702. Sense of Congress.

Sec. 9703. Department of the Treasury Kleptocracy Asset Recovery Rewards Pilot Program.

Subtitle B—Combating Russian Money Laundering

Sec. 9711. Short title.

Sec. 9712. Statement of policy.

Sec. 9713. Sense of Congress.

Sec. 9714. Determination with respect to primary money laundering concern of Russian illicit finance.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.

On November 25, 2020, Natalino D’Amato (“D’Amato”), a Venezuelan executive, was charged in an 11-count indictment with allegedly laundering $160 million between 2013 and 2017.  The indictment, filed in the Southern District of Florida, includes one count of conspiracy to commit money laundering, four counts of international money laundering, three counts of promotional money laundering, and three counts of engaging in transactions involving criminally derived property.  It is the latest episode in the enforcement campaign of the U.S. Department of Justice (“DOJ”) against alleged corruption involving Venezuela in general, and Venezuela’s state-owned and controlled energy company Petróleos de Venezuela S.A. (“PDVSA”) in particular. Continue Reading (Another) Venezuelan Executive Indicted in a $160 Million Money-Laundering and Corruption Scheme

The Financial Crimes Enforcement Network has been busy lately, and has issued a flurry of proposed rulemakings and requests for comment. Although “reform” is often in the eye of the beholder, all of these proposals will have a practical impact.

As part of Ballard Spahr’s webcast series, Consumer Financial Services in Turbulent Times, we will present a webinar on these developments on Friday, December 11, 2020 from 10:00 a.m. to 11 a.m. ET.  The webinar, entitled The Future of the Bank Secrecy Act: Regulatory Developments and Reform, will discuss:

  • An advanced notice of proposed rulemaking on regulatory amendments regarding “effective and reasonably designed” AML programs;
  • A request for comment on existing regulations regarding due diligence for correspondent bank accounts;
  • The final rule extending BSA/AML regulatory requirements to banks lacking a Federal functional regulator; and
  • A request for comment on a proposed rule that would expand significantly the “Recordkeeping Rule” and “Travel Rule” under the BSA.

To register, please click here.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.