The Anti-Money Laundering Act of 2020: The Remarkable Expansion of the U.S. Government’s Subpoena Power Over Foreign Financial Institutions | Perkins Coie

On New Year’s Day 2021, Congress passed the Anti-Money Laundering Act 2020 (AMLA). As we reported in April last year, the GwG 2020 included comprehensive reforms to strengthen protection against money laundering, terrorist financing and other illegal activities. In earlier parts of this series, we discussed new and extensive beneficial ownership requirements, significant improvements to the Bank Secrecy Whistleblower Program (BSA) under the AMLA, and the expansion of BSA / Anti-Money Laundering (AML) obligations for antique dealers.

In this fourth edition, published by the New York University School of Law’s Program on Corporate Compliance and Enforcement blog, we examine this remarkable expansion of the U.S. Department of Justice (DOJ) and Treasury Department (DOT) subpoena powers over foreign financial institutions, which is significant Affects overseas financial institutions that maintain US correspondent accounts.

Prior to the AMLA, the Patriot Act allowed the DOJ and the DOT to issue subpoenas to overseas banks holding overseas correspondent accounts in the United States for records relating to those correspondent accounts, including records held outside the United States. The AMLA significantly expands the divisions’ subpoena powers to include records of “any foreign bank account, including records held outside the United States.” This new authority improves US regulators’ access to foreign financial records and creates significant complexity and potential risk for foreign financial institutions that can have dire consequences if not complied with. The following is an overview of the key questions raised by this large new subpoena.

US access to all records of foreign banks with US correspondent relationships

Subpoenas now extend to all records, not just correspondence account records. The only material limitation on this subpoena is that the subpoena must relate to an investigation into a BSA violation, a U.S. criminal law, a civil foreclosure action, or an investigation under 31 USC Section 5318A. In fact, this restriction has little or no restriction on US prosecutors.

Legal conflicts. The GwG 2020 expressly demands that foreign data protection laws may not be the sole basis for the repeal of a subpoena issued under this new authority. In line with recent DOJ guidance on other matters, this provision underscores US regulators’ skeptical attitude towards claims that foreign privacy restrictions could prevent disclosure of documents and information related to US enforcement investigations. The AMLA recognizes that a subpoenaed foreign bank may petition the U.S. federal district court investigating the lawsuit to change or set aside the subpoena, but statutorily stipulates that foreign data protection laws are “not the only basis” for setting aside or Change a subpoena. This can pose difficult problems for foreign financial institutions in jurisdictions with onerous data protection restrictions.

Penalties for Notifying Subpoena Destinations. Account holders whose details are the subject of a query cannot be served with a subpoena, otherwise the foreign bank will be penalized under civil law. Unauthorized disclosure can result in civil penalties of up to twice the amount of suspected criminal revenue in the foreign bank’s U.S. correspondent account or, if no such revenue can be identified, up to $ 250,000.

Serious consequences for non-compliance. Failure to comply with a subpoena may result in the termination of US correspondent banking relationships. Under the extended subpoena, a US financial institution must terminate all correspondent banking relationships with a foreign bank within 10 days or be notified by the US authorities that the foreign bank has failed to comply with the subpoena. Any US bank that fails to comply with such notice could be fined up to $ 25,000 per day that the correspondence relationship remains active. Any foreign bank failing to comply with a subpoena may be subject to civil disregard and a civil penalty of up to $ 50,000 per day that the foreign bank fails to comply with, as well as other penalties at the discretion of the appropriate U.S. authorities can be district court.

The central theses

The AMLA’s extension of the DOJ and DOT’s subpoena powers demonstrates the U.S. government’s commitment to using access to the U.S. financial system as a gateway to expanding U.S. jurisdiction over data and records held outside of the United States. to support US law enforcement efforts to curb money laundering, terrorism and other criminal misconduct affecting the global banking system. Given the importance of these provisions to high-level US enforcement priorities, we can expect US regulators to pursue sound enforcement for non-compliance, including demanding the termination of US correspondent relationships with non-compliant overseas banks. Almost every large bank in the world that operates across borders (with the exception of banks based in countries sanctioned by the Office of Foreign Asset Control (OFAC)) has a US correspondent relationship and is therefore in the scope.

Interested parties should consider the potential impact of this extended subpoena. In particular, overseas banks with US correspondent relationships should review their subpoena response procedures to ensure they are ready to comply with the new requirements and have mechanisms in place to prevent unlawful disclosures to affected account holders. Foreign institutions should also consider potential conflicts with local data protection laws and necessary disclosures to customers in relation to the possibility of mandatory disclosure to US regulators. Given the potential impact of a misstep, banks should consider proactively addressing these issues before facing legal clashes and the choice of either complying with local law or losing their U.S. correspondent status.

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https://www.jdsupra.com/legalnews/the-anti-money-laundering-act-of-2020-7618674/