AML/BSA Trends to Watch: Keeping Your FI Ahead of the Game

January 15, 2025

Money laundering has emerged as one of the most severe financial crimes, hampering the economy of Financial Institutions (FIs). According to reports, 62% of FIs reported a year-on-year increase in fraud, posing a multifaceted challenge and affecting their predictive analytics and decision-making. The U.S. government introduced the Anti-Money Laundering Act (AMLA) to combat money laundering and other malpractices. In addition, the Financial Crimes Enforcement Network (FinCEN) implemented significant amendments to AML/BSA regulations aimed at streamlining operations and empowering FIs to effectively combat financial crimes.

Trends in AML: Guidelines for FIs

The functionality of AML/BSA has transformed over time, opening the gates of technological advancements while fighting against fraud. The trends in AML/BSA are thoroughly talked about below –

1. Promoting UBO Transparency: UBO stands for Ultimate Beneficial Ownership, which includes individuals who are the sole owners of more than 25% of a company’s shares or voting rights.

The Corporate Transparency Act was passed through the AMLA, which would legally obligate a certain portion of U.S. businesses to detail their owners and control structures to FinCEN so that criminals cannot hide money laundering behind a shell company.

FinCEN is also working to create a database to collect and manage the data, making it easier for regulators to investigate money laundering activities.

2. AMLA Expansion and Stronger Enforcement: The expansion of AMLA has broadened the scope of AML/BSA regulations. FinCEN and other authorities are granted powers to enforce AML/BSA laws, impose stricter penalties, and enhance international cooperation.

Under AMLA, whistleblower protections are strengthened, and rewards are increased for reporting AML/BSA violations.
The act also requires FIs to implement a more risk-based approach in their compliance efforts, focusing on higher-risk customers and transactions.

3. AML/BSA compliance for cryptocurrency and digital assets: The emerging trends in cryptocurrency and digital assets have brought significant compliance changes in the AML/BSA regulations. FinCEN, in accordance with AML/BSA regulations, has mandated that cryptocurrency exchanges and wallet providers adhere to the AML/BSA and KYC guidelines.

The Infrastructure Investment and Jobs Act (2021) expanded reporting obligations for crypto transactions, including tax reporting for transactions over $10,000.
The Travel Rule for cryptocurrency transactions exceeding $3000 was introduced, and the FIs must record and share it for a transparent and easy flow of currency through crypto channels.

4. BSA Extension: BSA extended its guidelines to incorporate essential players in the financial and non-financial markets, including Money Service Businesses (MSBs), casinos, and fintech companies. It now requires FIs to record and report Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) more diligently. Transactions involving cross-border transactions must also be scrutinized mandatorily.

5. Emphasis on the Real-Estate Industry: The real-estate industry is one of the most sensitive domains, and is easily prone to money laundering, mainly through high-value properties. Geographic Targeting Orders (GTOs) are broadened to require title insurance companies to report transactions where buyers purchase properties using shell companies and all-cash deals. To augment the safety and security of FIs, a permanent regulatory framework might also be introduced to mandatorily report it nationwide.

6. Enhance Artificial Intelligence (AI) use and Innovation: The emergence of the technological advancement and implementation of AI will help FIs to streamline their operations. AI will allow FIs to improve the efficiency of transaction monitoring, detect anomalies, and reduce false positives in SAR filings. FinCEN also believes in augmenting compliance efforts through AI and Machine Learning (ML) to fully control internal controls.

7. AML/BSA Whistleblower Programs: These programs play a substantial role in actively reporting money laundering violations. The incentives associated with such reporting are also strengthened with the new provisions offering rewards up to 30% of monetary penalties collected when strict actions are taken by whistleblowers, for example – SECs whistleblower program.

8. Cross-Border Cooperation and Global Harmonization: International authorities are collaborating with U.S. regulators to mutually follow and adhere to AML/BSA regulations and strengthen enforcement against global money laundering networks. The Financial Action Task Force (FATF) checks whether the activities of FIs align with U.S. regulations.

9. Tighten Sanctions Compliance: The Sanctions have been used more aggressively to target entities involved in money laundering or terrorist financing, especially focusing on individuals, corporations, and FIs linked to rogue states, criminal enterprises, and terrorist organizations. This has made the Office of Foreign Assets Control (OFAC) more aggressive about sanctions compliance within the financial service industry, and fines can be brutally heavy if faced without compliance.

10. Automating KYC: Know Your Customer (KYC) is the most crucial step taken by FIs to comprehend customers’ interests and check their validity before commencing any operations with them. The adequate use of AI and ML in the KYC process has reduced the time and effort taken to arrange customer data. Biometric identification has also helped FIs establish authentication standards.

Conclusion

The evolving landscape of anti-financial crime in 2024 presents both opportunities and challenges. AI-powered tools, verticalized LLMs, and real-time transaction monitoring are set to reshape how FIs detect and prevent fraud. By staying informed about these trends and adopting the latest technologies, FIs can stay ahead of financial crimes in 2025.