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The ENABLERS Act is a proposed law in the US – due to come into force in early 2023 – that aims to close the loopholes that allow ‘enablers’ to launder money.
For many years now, American banks and organizations classed as financial institutions have been required to carry out thorough due diligence on their customers to ensure the money they accept from their customers is from clean and from a legitimate source.
However, other enablers – i.e. businesses that transact with clients’ funds – were under no such obligation, and as a result, money launderers were increasingly using lawyers and other professional services firms to clean their dirty cash.
The problem was exacerbated further following the sanctions imposed on Russia earlier this year with Russian oligarchs using US lawyers, private equity firms and accountants to launder cash through the purchase of expensive art and real estate in the US.
In response, the U.S. House passed the National Defense Authorization Act (NDAA), and within it, is the Establishing New Authorities for Business Laundering and Enabling Risks to Security Act (ENABLERS Act), whose core aim is to close these loopholes by requiring other industries to carry out the same checks as financial institutions.
In practical terms, The ENABLERS Act changes the BSA’s definition of “financial institution” to include trust companies, art dealers, lawyers, accountants and other non-bank market participants; at the time of writing the Act affects the following professions:
Law firms and attorneys
Accountants and accountancy firms
Trusts and company service providers
Third-party payment services
Investment advisors and private equity firms
Insurance companies
Art and antiques dealers
PR, marketing and communications firms, or any service able to provide another person anonymity or deniability
These businesses will be subject to the same regulatory obligations as banks, which includes requiring them to design compliance frameworks, undertake extensive suspicious activity reporting (SAR), anti-money laundering checks, due diligence, account identification, and client verification. Put simply, they will – as financial institutions already do – have to:
Perform identification, verification and sanctions/PEP screening checks on new clients at onboarding stage
Monitor all customers daily against global sanctions lists
Keep records of all checks
Have a written AML policy in place that describes the AML process within the firm
Report any suspicious activity to the US Treasury department
When it was first passed, there was some push back, most notably from the legal profession. In response to the proposals, the National Bar Association said it had ‘significant concerns’ and that the new rules will ‘undermine the principle of lawyer-client confidentiality’.
However, the requirement for lawyers and other non-bank professionals to undertake due diligence is already in place in other jurisdictions. For example, in the UK lawyers and other professional services firms such as accountants have been subject to AML reporting rules for some time, while art dealers became regulated a year ago.
Martin Check, managing director at SmartSearch said: “We work with clients in both the US and the UK, and in the UK, AML laws have included firms other than traditional ‘financial institutions’ for years, and client attorney confidentiality is never an issue because all checks are secure.
“AML due diligence is not about breaking confidence, it is about preventing money laundering, and you cannot prevent financial crime if you do not have a full understanding of who your clients are and where their funds are coming from.”
The easiest, most cost effective, efficient and secure way for businesses to comply with the ENABLERS Act is to use an all-in-one AML platform.
SmartSearch is a fully comprehensive AML service that can ensure clients meet their ENABLERS Act obligations. It is an all-in-one AML platform that identifies, verifies – using the latest biometric and facial recognition technology – and screens clients all from one place. It then hosts all check data and monitors every client on a daily basis for any changes to their status, ensuring the firm is always fully compliant and audit ready.
Martin concluded: “The ENABLERS Act is due to come into force on in early 2023, so firms will need to ensure they are meeting their obligations by then. However, while these firms do not have a legal obligation to run AML checks yet, they do have a moral one, because bad actors are abusing the current loopholes now, so they sooner act, the better.”
To find out how to get ahead of the ENABLER Act and make AML compliance easy, secure and efficient, visit www.smartsearch.com/us
