The U.S. legislature recently enacted the National Defense Authorization Act (NDAA). Within the NDAA are a series of regulations referred to as the Anti-Money Laundering Act (AML).
The new rules set forth by the AML establish the most significant changes to anti-money laundering law since the PATRIOT Act was passed in 2001. Several provisions have been established that enhance the government’s ability to catch and penalize money launderers. The implications of these regulations can affect many different parties, from individuals with foreign bank accounts to art dealers and cryptocurrency companies.
Key Provisions of The Anti-Money Laundering Act
Several key reforms to anti-money laundering laws have been put in place when the U.S. Congress enacted the Anti-Money Laundering Act (AML).
Expanded Authority for the U.S. Government to Subpoena Foreign Financial Institutions
The AML expanded the authority of the U.S. government to request records from foreign financial institutions. Prior to the AML, the methods for acquiring documents from foreign banks were more difficult to employ successfully. Now, the process has been more streamlined. When the Department of Justice (DOJ) and U.S. Treasury investigate foreign bank holdings, they may now request any records pertaining to the account at issue or any other account at the bank.
Suppose a foreign bank does not comply with a subpoena issued by the U.S. government. In that case, the Department of Justice may ask for a court in the applicable jurisdiction to compel compliance. Afterward, if the bank still refuses to cooperate, then it may face potential sanctions and termination of certain accounts.
Heightened Civil and Criminal Penalties for Violations of the Banking Secrecy Act
The Banking Secrecy Act (BSA), like the AML, serves to enhance the enforcement of financial crimes like money laundering and tax evasion. The AML added provisions to the BSA that heighten penalties for those who purposely provide deceptive information to financial institutions. Furthermore, the AML strengthens the DOJ’s ability to target corruption on an international level.
Under the AML, the new penalties for misleading financial institutions include imprisonment for up to 10 years and $1 million fines. If you need help determining if these penalties may be applied in your case, reach out to our legal team as soon as possible.
Reach of Banking Secrecy Act Expanded to Cover Antiquities and Cryptocurrency
Furthermore, the AML has altered definitions within the BSA to include artifacts, art, and virtual currencies. Accordingly, the prohibitions set forth by the BSA now also apply to transactions brokered by institutions that deal in cryptocurrencies and antiquities. Those who engage in money laundering practices with such assets may be punished the same as those attempting to hide fiat money.
Establishment of a Reporting Requirement for Beneficial Owners
The AML has also created a beneficial ownership reporting program that applies to limited liability companies, corporations, and other similar entities registered to do business in the U.S. Companies must use the program to provide the government with information about their “beneficial owners.” Beneficial owners are those who control a minimum of 25% of companies’ ownership interests. Additionally, individuals who directly or indirectly exercise substantial control over companies will be considered beneficial owners.
Information pertaining to beneficial owners should be reported to the Financial Crimes Enforcement Network (FinCEN).
Enhanced Protections for Whistleblowers
Lastly, the AML has also expanded protections for whistleblowers and increased their potential rewards. To qualify for these benefits, whistleblowers must report information that leads to money launderers’ convictions. Those who report such information will also be protected from retaliation.
Examples of Money Laundering Schemes
There are many different types of money laundering schemes. The following are common types of schemes that have been employed in the past:
Casino Laundering
Casinos are locations where a great deal of money changes hands. People with dirty money can launder it through casinos by buying chips, gambling in tiny amounts, and then cashing out. Perpetrators of casino laundering can face severe criminal penalties.
Bank Laundering
Bank laundering is a type of laundering that occurs when an individual who owns a financial institution moves funds through that institution and into another. This scheme can be difficult to detect because it often occurs using various currency exchanges.
Structuring
Structuring is a money laundering scheme when large amounts of cash are split into smaller pieces and deposited into many different accounts via money orders or cashier’s checks. Another term for structuring is “smurfing.”
Layering
Similar to structuring, layering is a money laundering scheme that involves putting dirty money through a high number of transactions and transfers. The goal of layering is to distance funds from their illegal origins.
Cash Business Laundering
It can be hard to detect money laundering through cash businesses like restaurants, laundromats, vending machines, and car washes. When large amounts of cash are already flowing into a business, it will likely be more difficult to prove that certain funds are being cleaned.
Trade-Based Laundering
Dirty money can also be cleaned by moving it through several different trade transactions. These transactions may involve falsely invoicing goods and services, falsely listing the sale of goods and services, or creating several invoices for singular transactions.
Laundering Through Cryptocurrency
Virtual currencies such as Bitcoin are not regulated in a uniform manner. This makes them an easy vehicle to facilitate the laundering of criminal funds. Laundering through cryptocurrency is a relatively new scheme, and regulators are still trying to catch up.
Real-Estate Laundering
Lastly, dirty money can also be cleaned by using it to purchase real estate. After the purchase, the newly acquired property can be sold for “clean” money.
Undisclosed Foreign Financial Accounts and Cryptocurrency Transactions
If you have failed report taxable income related to an offshore business, investment, or cash deposit, especially where you have also failed to file the related required foreign information reporting. If you have large amounts of taxable income that has gone unreported related to domestic or offshore cryptocurrency, failed to file a tax return for one or more years, or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income including cryptocurrency) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
If you suspect that you may be charged with a tax crime, consult with our Dual Licensed Criminal Tax Defense Attorneys and CPAs at the Tax Law Offices of David W. Klasing. Call us today at (800) 681-1295 or click here to schedule a reduced rate initial consultation.
See our 2011 OVDI Q and A Library
See our FBAR Compliance and Disclosure Q and A Library
See our Foreign Audit Q and A Library
See our Bitcoin and Cryptocurrency Q and A Library
