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Monday, February 6th, 2023

House bill would better target money laundering, terrorism financing

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Financial institutions would have more latitude to share suspicious activity reports when money laundering or terrorism financing is suspected, and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) would be modernized, under a bill introduced in the House of Representatives on Monday.

The Anti-Money Laundering and Counter-Terrorism Financing Modernization Act, H.R. 4373, would also adjust reporting thresholds for suspicious activity reports (SARs) and currency transaction reports (CTRs) based on inflation. Reporting thresholds have been modified in 21 years and 45 years, respectively.

U.S. Reps. Ed Royce (R-CA) and Vicente Gonzalez (D-TX), authors of the bipartisan bill, noted the importance of raising the reporting thresholds for SARs and CTRs in a letter to Treasury Secretary Steven Mnuchin in July.

“Currently, covered institutions are required to file a CTF for transactions that collectively exceed $10,000 during the course of the day if the institution has knowledge that they are for or on behalf of the same person,” the letter states. “Institutions are also required to file a SAR if they suspect that a transaction over $5,000 may involve money laundering or other illegal activity, is designed to evade the BSA, or has not business or apparent lawful purpose or is not of the type iin which the customer would be expected to engage.”

If adjusted for inflation, CTR filing requirements would cover transactions of $58,000 or more, and SAR filing requirements would apply to transactions totaling 50 percent more than the current threshold. The move would reduce the 55,000 filings FINCEN receives each day, enabling it focus on those with greater national security or law enforcement consequences.

“Financial criminals and terrorists have evolved in the decades since our anti-money laundering regime was built but our regulatory structure hasn’t kept pace,” Royce said. “By some estimates, nearly 70 percent of spending on AML compliance is focused on inputs over outcomes. This does little to thwart criminal syndicates, rogue nations and terrorist networks but it strips away resources that could be better spent on new technologies and other innovations to support national security. The AML and CTF Modernization Act will refocus our regime on quality over quantity, providing new tools to assist law enforcement.”

The measure would also direct the Treasury Department to enhance qualitative feedback provided to financial institutions and to improve the process for FinCEN administrative rulings. Additionally, the Treasury Department would be directed to probe the use of artificial intelligence, machine learning and other available technologies to better detect and prevent money laundering.

“Money laundering poses a serious threat to the legitimacy and stability of our local, national, and international financial institutions,” Gonzalez said. “… Enacting this important legislation will bolster the transparency and efficiency of our financial system while enhancing our ability to prevent money laundering schemes in a timely manner.”