By Legal Futures Associate Lawtech
As the financial world evolves, so too does the landscape of Anti-Money Laundering (AML) regulations. The year 2024 marks a significant period of regulatory reform, with major new legislation expected to impact global markets and set precedents for future policies. Here we explore five pivotal AML regulatory changes poised to shape the sector.
The United States Corporate Transparency Act
On January 1, 2024, the United States enacted the Corporate Transparency Act (CTA), a major step forward in the fight against financial crimes. This act requires all U.S. and foreign entities operating within the U.S. to disclose their beneficial owners to the government. A beneficial owner is identified by their full name, date of birth, current address, and an identifying number, which must be regularly updated to reflect any significant changes.
Non-compliance with the CTA can lead to severe penalties, including fines of up to $10,000 and potential imprisonment for up to two years. This legislation underscores the U.S. government’s commitment to piercing the veil of corporate anonymity in a bid to tackle illicit financial flows.
European Union’s AML Directive
The European Union is set to solidify its AML framework with a comprehensive package expected to be finalised in early 2024. This initiative follows a spate of money laundering scandals and aims to harmonise AML and Counter Financing of Terrorism (CFT) measures across member states. The package includes the creation of a new AML Authority (AMLA), the implementation of the 6th Anti-Money Laundering Directive, enhanced regulations for crypto asset transfers, and clearer guidelines for entities obligated under AML/CFT regulations. This robust framework signifies a major step towards a unified regulatory approach across Europe.
United Kingdom’s Economic Crime Plan
The UK’s Economic Crime Plan 2 (ECP2), unveiled in 2023, sets out ambitious goals to mitigate money laundering risks, combat corruption, and enhance the integrity of the financial system. The plan involves expanding the capabilities of the National Crime Agency, enhancing cross-border information sharing, and implementing comprehensive system reforms. Additionally, a significant investment of £400 million has been allocated to bolster these efforts until the end of the 2025 financial year. This strategic update not only aims to protect the UK’s financial interests but also strengthens its position in the global fight against illicit financial activities.
Australia’s Tranche 2 reforms
Australia plans to introduce its Tranche 2 reforms within the 2024/2025 timeframe to bolster its AML/CFT regulations. These reforms are crucial as they extend the regulatory perimeter to include lawyers, real estate agents, and other non-financial businesses, which have been under-regulated in terms of AML standards. The proposed changes are expected to introduce stricter compliance requirements, enhance the legal framework, and increase penalties for non-compliance. This proactive approach is intended to prevent Australia from being listed on the Financial Action Task Force’s (FATF) grey list, illustrating the country’s commitment to upholding robust AML standards.
AI and AML: The G7’s Hiroshima AI process
The G7’s Hiroshima AI Process marks a significant milestone in the regulation of Artificial Intelligence (AI), with implications for AML practices. Unveiled in October 2023, this initiative outlines guiding principles and a code of conduct for organisations developing AI technologies. The Bletchley Declaration on AI safety, which followed, emphasised the need for comprehensive international cooperation to manage AI risks effectively. These developments are crucial for AML/CFT professionals as they highlight the emerging role of AI in enhancing regulatory frameworks and the importance of establishing standardised, responsible AI practices worldwide.
Verify 365’s role In AML and compliance challenges
With new legislations coming in place across the UK and beyond, the pressure is on for businesses within the legal sector and financial sector to ensure they are practicing compliantly. Innovations in technology are playing a significant role in helping firms and businesses tackle AML and compliance challenges including Verify 365, the all in one, client onboarding platform that allows firms to complete fast, compliant identity checks within a few minutes.
Verify 365 risk & compliance platform distinguishes itself with its innovative approach to client verification through “Lite” checks, which provide dashboard-based, quick AML verifications, and “Enhanced” Client Due Diligence (CDD), the comprehensive AML suite. The Enhanced CDD checks include biometric/NFC ID verification, address validation, politically exposed persons (PEPs) and sanctions and adverse media checks, and FCA-regulated Open Banking source of funds checks (4000 banks) along with sophisticated financial analytics. This enables law firms to conduct exhaustive and compliant AML and client due diligence swiftly and efficiently.
Verify 365 is built within the framework of the regulatory body ensuring compliance and crucially, allowing you to fully focus on your core legal work. Access everything you need on one effective, AML solution platform that is transforming the processes of firms across the globe and enhancing the overall experience of their clients.
A significant year for AML regulations
The year 2024 is set to be a transformative one for AML regulations globally. With substantial reforms from the U.S. to Australia and strategic initiatives in AI governance, these changes promise to significantly enhance the integrity of the financial system. For policymakers, financial institutions, and AML professionals, staying ahead of these regulations will be crucial in navigating the complexities of the modern financial landscape, ensuring compliance, and promoting a safer global economy.
