Anti-Money Laundering/Know Your Customer (AML/KYC) Alert

RPTE Members – on September 30^th there was a very important AML/KYC development, and three more changes are pending. Here is an executive summary of the things you should know.

1.      What happened? The final rules for the reporting regulations under the Corporate Transparency Act (CTA) were published on September 30, 2022 and they will be effective on January 1, 2024. Most entities created in or registered to do business in the United States will be required to report to FinCEN information about their beneficial owners. Reporting companies created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports. Once the initial report has been filed, both existing and new reporting companies will have to file updates within 30 days of a change in their beneficial ownership information. Here are links to the final CTA rule (Federal Register :: Beneficial Ownership Information Reporting Requirements) and to the FinCEN CTA “Fact Sheet” - Beneficial Ownership Information Reporting Rule Fact Sheet | FinCEN.gov.

2.      What is on the horizon?

a.      The ENABLERS Act.  The ENABLERS Act was approved by the US House of Representatives in July 2022 as part of the National Defense Authorization Act. If the ENABLERS Act is passed, Treasury will promulgate rules regulating many business, real estate, estate & trust, tax, and other lawyers under the Bank Secrecy Act as "financial institutions" and require them to submit to the government suspicious activity reports, beneficial ownership information, account information, and other protected information regarding their clients.  A copy of the H.R.5525 (the House bill for the ENABLERS Act) can be found at: H.R.5525 - 117th Congress (2021-2022): ENABLERS Act | Congress.gov | Library of Congress.

b.      The access and customer due diligence rules. FinCEN has plans to revise proposed regulations governing access to the collected beneficial ownership information and the customer due diligence (CDD) rule. Please stay tuned. For more information on the CDD rule, please refer to: CDD Final Rule | FinCEN.gov.

c.     ABA Model Rule 1.2. The ABA is currently considering changes to Model Rule 1.2 (Scope of Representation & Allocation of Authority between Client & Lawyer) and what lawyers should do as part of the client intake process. It is too early to tell whether and to what extent the rule may be modified.  For a copy of the current Model Rule 1.2, please see: Rule 1.2: Scope of Representation & Allocation of Authority Between Client & Lawyer (americanbar.org),  and official comments at Rule 1.2 Scope of Representation And Allocation of Authority Between Client And Lawyer - Comment (americanbar.org).

Thank you to the members of the RPTE Working Group on Anti-Money Laundering/Counter-Terrorist Financing Efforts Affecting Lawyers for this update and their continued efforts.