What does the ENABLERS Act mean for your business?

What does the ENABLERS Act mean for your business?

In October 2021, the US House passed the National Defense Authorization Act (NDAA), and within it, the Establishing New Authorities for Business Laundering and Enabling Risks to Security Act, known as the ENABLERS Act.

The aim of the ENABLERS Act – the biggest shakeup to US AML law in more than 50 years - is to close the ‘loophole’ whereby money launders are increasingly exploiting the services of professions not currently governed by Anti-Money laundering regulations.

Money launderers are exploiting professions such as lawyers, investment firms and accountants, to clean their dirty cash because unlike banks, these businesses are not required to carry out thorough due diligence on their clients or the source of their funds.

This lack of regulation around the clients of non-financial institutions enables criminals to use these firms as they would a bank, but, by-passing the checks so they are able to legitimatise their ill-gotten gains. This type of activity has been an issue for many years but has been exacerbated by the increased sanctions on Russian nationals.

Will the ENABLERS Act affect my business?

The ENABLERS Act proposes to change the BSA’s definition of “financial institution” to include a number of other professions that transact with large amounts of clients’ funds. This includes (at the time of writing), law firms and attorneys, accountants, trust and company service providers, third-party payment services, investment advisors and private equity firms, insurance companies, art dealers and PR firms. If it is passed in its current form, firms in that list will be required to comply by the end of 2023.

Therefore, if your business is in one of those sectors, once the ENABLERS Act comes into force you will be required, by law, to carry out proper KYC and Anti-money Laundering (AML) due diligence on all your customers to determine the legitimacy of both them and their funds.

What does my businesses need to do to comply?

Instead of bringing these businesses into AML law, the ENALBERS Act has ‘redefined’ these businesses as financial institutions, which simplifies matters somewhat as it means that any firms affected are now just subject to the same AML obligations as financial institutions. Therefore, if you are impacted by the ENABLERS Act your business will need to:

• Run identification and verification checks on all clients to determine who they are

• Screen each customer against Global Sanctions and PEPs lists to ascertain their risk

• Keep records of every check, and monitor your entire customer database daily for any changes to the status or risk of any of your customers

• Ensure you have a written KYC/AML policy in place that describes the AML checks you are performing

• Report anything suspicious to the US Treasury department

What is the easiest way for my business to comply with the ENABLERS Act?

When your business is faced with a raft of new requirements, which have serious consequences if they are not met, it can feel quite overwhelming. However, due to the fact that these requirements have been in place in the US for financial institutions for some time - and for other professions across the Globe - there are already a number of reliable and affordable solutions on the market which can take that stress away.

The easiest, most reliable and most affordable way to meet your obligations under the ENABLERS Act is to use a third-party AML platform.

SmartSearch was the first fully comprehensive AML on the market, offering an all-in-one identification, verification, screening, hosting and monitoring service for financial institutions in the US - and regulated firms in the UK, including accountants, investment firms and lawyers – and offers the ideal solution for those firms coming under AML law as a result of the ENABLERS Act.

The platform identifies, verifies – using the latest biometric and facial recognition technology – and screens clients all from one place, hosts all check data securely on the cloud, and monitors every client on a daily basis for any changes to their status.

The platform can be accessed via desktop, or via tablet or cell phone, making it easy for user to onboard new customers any time anywhere, check the status of existing clients and run full audit reports.

The platform is updated to reflect any changes in regulation and can be tailored to suit each user firms’ size, customer base and individual risk profile, meaning it is affordable for all businesses, no matter their size.

Martin Check, managing director at SmartSearch said: “The ENABLERS Act is a huge change to US AML law, affecting millions of firms across the country, and many are worried about the extra responsibility it will bring.

“But if you use a third-party provider, you will not need to worry – they are already set up to meet the requirements of the ENABLERS ACT so it is easy for your business to get set up.

“If you are one of the professions affected by the ENABLERS Act, you are under no legal obligation to comply yet, however, the sooner you start to put AML processes into place, the better. This is not only because a head start will help ensure that when the rules do come into play, you will already be complying, but also, because the loopholes that this law has been brought into close are being abused by money launderers every day, so the sooner you comply, the quicker you can stop these criminals from cleaning cash that is more than likely funding some of the most erroneous crimes in the world.”

To find out how to get ahead of the ENABLERS Act and make AML compliance easy, secure and efficient, sign up for our webinar on the ENABLERS Act today.