On 1 January, 2021 the US Congress passed the Anti-Money Laundering Act of 2020 (AMLA), the first major money laundering reform in 20 years. Included within the AMLA is the Corporate Transparency Act (CTA) which creates a beneficial ownership registry and modernizes whistleblower protections.
The AMLA is intended to combat the use of “shell companies” as havens for money laundering and other illicit activity. The beneficial ownership registry requires millions of domestic and foreign companies registered to do business in the United States, to disclose information regarding their beneficial owners. This information will be accessible to law enforcement and, in certain circumstances, financial institutions.
The CTA includes sections for protecting and rewarding whistleblowers when challenging financial misconduct. The law protects disclosures of money laundering and related illegality. It includes best-practice provisions for confidentiality, legal burdens of proof, and shields against gag orders. A newly established fund can pay financial rewards to whistleblowers when the government is able to recuperate money based on their monitoring.
“The new provisions serve as the most significant update to U.S. anti-money laundering laws in a generation” reads a statement by Transparency International's U.S. Office’, which helped legislators draft the law.
According to the International Consortium of Investigative Journalists (ICIJ), anonymous companies are a major vulnerability in the global fight against tax avoidance and money laundering. Drug cartels, oligarchs, despots and the global elite use them to conceal fortunes from tax authorities and law enforcement. This act is a needed key reform.
However, the ICIJ states that “The landmark legislation contains several loopholes, exemptions and shortcomings that may become key vulnerabilities in the fight against corruption and financial secrecy, advocates say” in their article Seven things to watch after historic anti-money laundering overhaul in the US.
The act does not directly address beneficial ownership of trusts. Trusts are sometimes used to avoid taxes and to hide and launder money, and are “murky legal creatures.” Trusts in New Zealand and the United States remain vulnerable vehicles for money laundering.