AML in the USA: A Guide to USA Laws & Regulations

The United States has the most operative economy within the global market. It has developed sound legal measures against the conduct of money laundering and financing of terrorism. In this article, let’s understand in detail the AML in the USA.

What is AML in the USA?

Anti-money laundering or AML is a system of measures that allow intending criminals to bring income derived from concerning activity into conformity with legal requirements with the help of methods that are lawful and appear legitimate. In the US, it targets using, preventing, and availing information on Money Laundering.

Key Components of AML Laws in the USA

The principal legislation which is the foundation of the AML in the USA legal regime includes the following: All of them serve the goal of offering a coordinated attempt to combat and fight money laundering and associated crimes.

1. The Bank Secrecy Act of 1970

The changes concerning the definition of currency transaction reporting are contained in the Bank Secrecy Act of 1970. If one were to arrange all the present AML regulations in the USA in a sequential rank, then strangely enough, the most primal out of all of them would be the Bank Secrecy Act. It was passed in 1970 and provides that certain banks and similar institutions must keep proper records and prepare and make available to criminal, tax, and regulatory investigative and prosecutorial authorities and certain reports to legislative hearing facilities. These documents and papers give leads for investigations, they are useful for detecting and prosecuting money laundering and other related fraud offenses.

2. Money Laundering Control Act of 1986

Money Laundering Control Act of 1986 regulates money laundering crime in the United States.

This legislation introduced money laundering as a federal offense since the act was prohibited under this legislation. It also meant penalties for using account structure that would help avoid CTR filings and put measures in place to help banks prevent laundering money deals.

3. Anti-Drug Abuse Act of 1988

The Anti-Drug Abuse Act of 1988 extended the list of financial institutions and it made car dealers, and real estate agents, among others, report large currency transactions.

4. The Patriot Act

Introduced after September 11 the USA Anti-terrorism Act, also referred to as the USA PATRIOT Act, endeavored to equip Law enforcement agencies and financial organizations to combat money laundering. The Act increased the government’s powers of observation and put measures to control monetary transactions with a new twist in international transactions.

5. Anti-Money Laundering Act 2020

The most recent addition to the AML in the US legal system is the Anti-Money Laundering Act (AMLA) of 2020. AML regime requires updates as the threats it faces evolve and this Act is aimed at modernizing this type of regulation. It contains provisions for enhanced customer due diligence and new rules on beneficial ownership, additional penalties for AML offenses, and tries to introduce whistleblowing measures.

AML Screening and Monitoring

AML Regulations in the USA

Various AML regulations in USA are implemented to ensure financial institutions maintain effective programs to mitigate risks associated with money laundering and terrorist financing. These regulations set out specific requirements for institutions, including:

1: Customer Identification Program (CIP):

It is required to have a Customer Identification Program (CIP) that would be adopted by a financial institution to verify the identity of persons who are applying for an account

2: Customer Due Diligence (CDD):

Every institution is expected to do Customer Due Diligence (CDD) in the interest of identifying such features of business relationships with the customers.

3: Suspicious Activity Reporting (SAR):

Companies are required to submit transactions that seem to refer to money laundering or any other unlawful acts.

4: Currency Transaction Reporting (CTR):

Banks and other financial-related organizations are required to file any cash transactions that exceed $10,000 during a single business day.

Organizations affected by AML rules in the USA

AML regulations in the USA concern a numerous list of companies, though not obligatory financial ones, such aspsilon.

  • Banks and Credit Unions
  • Broker-dealers in securities
  • Money Services Businesses (MSBs)
  • Mutual Funds
  • Insurance Companies
  • Standing affidavit of futures commission merchants and introducing broker in commodities.

Who Regulates AML in the USA?

The Bureau of the U.S. Department of the Treasury known as the Financial Crimes Enforcement Network more commonly known as FinCEN, is the chief in implementation of AML laws within the USA. Other authorities and agencies like the Office of the Comptroller of the Currency (OCC), Federal Reserve System, and the Securities and Exchange Commission (SEC) among others have a central role in implementing the laws on AML in their regions.

AML Laws in 2024

Consecutive new AML regulations in the USA are introduced annually, and 2024 will be no different. Several authorities are planning a slew of measures with serious ramifications. Here are a few newly introduced AML Laws in the USA:

1: The Corporate Transparency Act (US)

The Corporate Transparency Act (CTA) was enacted on January 1, 2024, and established standards for beneficial owner disclosure in the United States. It binds companies to disclose their beneficial owners to the government while giving instructions on how this information should be recorded or reported. Beneficial ownership information (BOI) includes full name, date of birth, current address, and unique identifier(s).

This law applies to both local and international enterprises operating within American borders. Violation by directors can attract financial penalties amounting to $10,000 per day as well as up to two years imprisonment. Major changes must be communicated to FinCEN by businesses.

2: AI regulations (G7)

As part of its Statement on the Hiroshima AI Process, the G7 announced the International Guiding Principles and Code of Conduct for Organisations Developing Advanced AI Systems in October 2023 to address priorities. UK government and technology leaders met with twenty-eight governments—UK, US, EU, Australia, and China—to sign the Bletchley Declaration on AI safety in November. The statement emphasizes worldwide collaboration to address AI threats and leverage the “transformative positive potential of AI” while developing human-centric, trustworthy, and responsible AI. Companies also promised to test new models with governments before release to reduce risks.

Regulators and legislators are starting to plan national AI regulation, which is crucial for AML/CFT experts. EU, US, Canada, and UK legislative plans are at different stages of development, with more formalized standards expected through 2024.

How Does KYC Hub Help with AML in the USA?

KYC Hub has a range of tools that can help businesses comply with AML in the USA as follows:

1: Identity Verification:

Under this, the platform makes use of cutting-edge technology such as document verification, biometric checks, and global database cross-referencing to verify individuals and entities.

2: Sanctions and PEP Screening:

KYC Hub conducts client screening against various sanctions lists, politically exposed persons (PEP) lists, or adverse media sources to identify high-risk persons and organizations to prevent illegal activities and transactions with them.

3: Transaction Monitoring:

Machine learning and AI use pattern analysis systems to monitor transactions for any suspicious activity that may be indicative of money laundering.

4: Risk Assessment:

Through examination of their background, transaction history, or geographical location, the system assesses clients’ risk levels helping identify potential risks for money laundering that can then be mitigated.

5: Continuous Monitoring:

Continuously updated customer data from KYC Hub is used to screen and detect changes that could lead to increased money laundering risks therefore facilitating compliance over time.

KYC Hub's AML Screening and Monitoring Solution

Conclusion

The AML in the USA demands compliance as it is not only a legal requirement wherein business entities need to shield themselves from money laundering and terrorist financing risks. When businesses understand the AML laws and the necessary tools in the business, then these financial crimes would be prevented or detected thus making the financial environment secure. With a focus on the USA market, KYC Hub is your best choice for AML Solutions. Let us help you onboard your customers faster and more efficiently.

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