Wall Street Poised for Win on Money-Laundering Bill in Lame-Duck

(Bloomberg) -- Wall Street is on the verge of a long-sought lobbying win to relax anti-money laundering requirements, as Congress moves to wrap up its work for the year.

The measure, tucked into a must-pass Defense Department spending bill, could dramatically lighten lenders’ compliance burdens by creating a business-owner database to keep illicit cash out of the financial system and bar use of anonymous shell companies to launder money. Lawmakers released a final version of the legislation on Thursday, which still needs a vote in the House and Senate before it can be signed into law by President Donald Trump.

“This bipartisan legislation protects Americans by depriving criminals and terrorists of the tools they use to finance illicit activity,” Republican Senator Mike Rounds of South Dakota said in a statement. “It is the first serious overhaul of our anti-money laundering system in decades.”

The money-laundering changes have long been a focus of banks, which are held responsible for reporting suspicious transactions and ensuring customers’ identities -- duties considered vital in pursuing financial crimes. The industry has argued that the bill will modernize law enforcement’s ability to get useful information while also simplifying banks’ costly compliance demands.

Bank Policy Institute President and Chief Executive Officer Greg Baer, whose group led the push for the measure, hailed its inclusion in the sweeping defense authorization bill as “the culmination of years of bipartisan work.”

“This legislation is good news from every perspective: law enforcement, national security, international development, and a banking industry desperately wishing to modernize its approach to finding illicit actors,” Baer said in a statement.

Wall Street critics have complained for years that the industry doesn’t do enough to keep illegal cash out of the financial system. For their part, lenders have bristled over customer complaints about the extensive information they’re required to collect and contend that what data they do share with the government is rarely used to catch criminals. The bill is expected to clear a path toward the use of artificial intelligence to root out suspicious transactions, streamlining a lot of labor-intensive work inside the banks.

The changes banks want won’t come without a cost -- namely to small businesses’ compliance efforts. The Congressional Budget Office estimated that the bill would generate substantial expense by requiring as many as 30 million new filings a year to the Treasury Department’s Financial Crimes Enforcement Network, which would track companies’ ownership in a confidential registry. Negotiations over the legislation have since sought to make the new system more palatable to small businesses, according to people familiar with the talks.

“If it only applied to shell companies, we wouldn’t probably have as many objections,” said Kevin Kuhlman, who has lobbied for the National Federation of Independent Business against the bill, which requires firms with small numbers of employees to submit accurate ownership information.

Kuhlman said there is also concern among small businesses over the security of information that would be provided by companies for the new database. FinCEN, which would host the new registry, was caught up in a massive leak of banks’ secret disclosures that revealed trillions of dollars in suspicious bank transactions. News reports based on the documents fueled a new round of criticism that global financial firms have enabled large-scale money laundering under current rules.

A potential complication for the bill is that Trump has threatened to veto the broader legislation in a dispute over liability protections for social media companies, which he and other conservatives have said unfairly censor their views.

©2020 Bloomberg L.P.