Pub. 17 2020 Issue 4

16 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S O n January 1, 2021, the Senate voted to override President Trump’s veto on the National Defense Authorization Act (NDAA or Act). It was pre - viously overridden by the House back on De- cember 28, 2020. The NDAA included over 200 pages of significant reforms to the Bank Secrecy Act (BSA) and other anti-money laundering (AML) laws putting forth the most comprehensive set of BSA/AML reforms since the USA PATRIOT Act of 2001. The continuing question is, what are the implications of this Act? How will this impact not only financial institutions but also U.S. companies and companies doing business in the United States at large? For starters, certain U.S. companies and companies doing business in the U.S. (“reporting companies”) will be required to provide FinCEN with information regarding their beneficial owners. This includes names, addresses, dates of birth, and unique identifying numbers. Newly incorporated companies will be required to do so at the time of incorporation. Exempt companies include public companies, as well as companies that: (i) have more than 20 full-time employees, (ii) report more than $5 million in yearly revenue to the Internal Revenue Service, and (iii) have an active presence at a physical office within the United States. Changes in beneficial ownership will require reporting companies to provide FinCEN with updated information within a year. FinCEN has stated it will maintain a registry of this beneficial ownership information, but it will not be public. However, this does not prevent FinCEN from sharing this information with federal, state, local and tribal law enforcement agencies if there is appropriate court approval. FinCEN can also share the beneficial ownership information with financial institutions for customer due diligence purposes, but only with the reporting company’s consent. Second, this NDAA creates a new whistleblower program and establishes a private right of action for whistleblowers who have experienced retaliation. Aiming to incentivize re - porting of BSA/AML violations, this program will award whis- tleblowers who give tips with as much as 30% of the monetary penalties assessed against the company if it leads to monetary penalties in excess of $1 million. This will depend on the sig - nificance of the information, the degree of assistance provid - ed, and the government’s interest in deterring BSA violations through these awards. Additionally, a private right of action for whistleblowers who suffer retaliation will be available — whistleblowers can file complaints with the Occupational Safety and Health Administration (OSHA) where, if OSHA fails to issue a decision within 180-days, the whistleblower will be free to file a claim in federal district court. Third, the Act considerably increases the penalties for BSA/AML violations for both companies and individuals. For repeat violations, additional civil penalties of either (i) three times the profit gained or loss avoided (if practicable to calculate) or (ii) two times the otherwise applicable maximum penalty for the violation are now in play. A new BSA provision will allow for fines “equal to the profit gained by such person by reason” of the violation. It will also include bonuses paid out the year in which the violation occurred or the following year for financial institution directors and employees. Those who have been determined to have engaged in “egregious” violations of BSA/AML provisions may even be barred from serving on the board of directors of a U.S. financial institu - tion for 10 years from the date of the conviction or judgment. Lastly, the Justice Department will, for the next five years, submit reports to Congress on the use of non-prosecution and deferred prosecution agreements during BSA/AML concerns. By Elizabeth K. Madlem Vice President of Compliance Operations and Deputy General Counsel THE NATIONAL DEFENSE AUTHORIZATION ACT: BSA/AML INITIATIVES