The ENABLERS Act - What are the financial implications if businesses don’t act now?

The ENABLERS Act is due to come into force in 2023, which changes the definition of a ‘financial institution’ to bring a number of other professions under US anti-money laundering law.

For years, financial institutions have been required to perform thorough due diligence on their customers, but other firms that handle customer funds – for example, law firms, accountants, investment firms – have not. This ‘loophole’ has not only enabled money launderers to bypass AML checks and clean their dirty cash, but also puts these non-financial institutions at considerable risk.

Why should I be concerned?

Money laundering is often regarded as a ‘victimless’ crime, but this could not be further from the truth. Not only is money laundering a crime in itself, but significantly, it is an enabler of much more serious crime.

Organized crime such as drug trafficking, people smuggling, terrorism funding, smuggling, extortion, and fraud, endanger millions of people globally, and impose tremendous social and economic costs upon society. As the proceeds of such activities are legitimized by money laundering, combating money laundering may result in a reduction in criminal activity and hence a significant benefit to society.

Anti-money laundering (AML) seeks to deprive criminals of the profits from their illegal enterprises and eliminate the main motivation for them to engage in such nefarious activities. Given that the vast majority of dirty money is actually funding for, or profit from, serious organized crime, if legitimate firms enable money launderers to clean their dirty cash, they are also inadvertently allowing them to continue with their abhorrent criminal activities.

Money laundering is also hugely damaging to the economy. One of the key ways in which money launderers clean their criminal proceeds is through other businesses that appear legitimate – beauty salons, realtors, etc, and in doing so, are making it much more difficult for honest companies to compete in the market, putting many out of business.

And obviously, criminals that are laundering the proceeds of their crimes are not paying tax on any of the money they make and are therefore denying the US economy of millions of dollars in taxes that could be helping fund public services.

The other financial implications of money laundering - for individual businesses - is that if they fail to put procedures in place to stop it, not only is the business left completely vulnerable to financial crime, but is also at risk of huge fines for non-compliance, as well as the possibility of losing their legal right to trade.

How can I avoid risks to my business?

The best thing to do to avoid these financial, legal and reputational risks is to start putting procedures in place now – this will help stop money launderers and protect your business. Plus, it will mean that when the rules come into force, your business is already complying, meaning you will not face regulatory action.

Due to the fact that these requirements have been in place in the US for financial institutions for some time, there are already a number of reliable and affordable solutions on the market which can ensure you meet the requirements under the ENABLERS Act, which are:

1.       Identification, verification and sanctions/PEP screening checks on new clients at onboarding

2.       Daily monitoring of all customers against global sanctions lists

3.       Comprehensive record keeping

You must also ensure you have a written AML policy in place and that any suspicious activity is reported to the US Treasury department.

SmartSearch already works with financial institutions in the US, and in the UK, has provided monitoring for other sectors including accountants, investment firms and lawyers, for many years, meaning it already has a solution in place for firms coming under AML law as a result of the ENABLERS Act.

The platform is updated to reflect any changes in regulation and can be tailored to suit each user firms’ size, customer base and individual risk profile, meaning it is affordable for all businesses, no matter their size.

Why should I act now?

While the ENABLERS Act may seem like a huge, arduous change for those businesses that have not been subject to regulation before, there are a huge number of  third-party providers already set up to meet the requirements of the ENABERS ACT so it is easy for businesses to get set up, and the sooner they do so, the better.

Martin Check, managing director at SmartSearch said: “Because the ENABLERS Act is not yet in place, many businesses are reluctant to do anything yet, however, the threat that the ENABLERS Act aim to mitigate are very real, and any businesses not already running AML checks should start as soon as possible.

“Money laundering through businesses like accountancy firms, legal firms and investment advisors is already enabling a huge amount of organised crime to continue, so the sooner these checks are put in place, the better, Plus, any businesses that start to put these procedures in place now will have a head start, helping ensure that when the rules do come into play, they will already be complying.”

To find out how to get ahead of the ENABLER Act and make AML compliance easy, secure and efficient, visit https://www.smartsearch.com/us or register for one of upcoming webinars – The ENABLERS Act – how will the most significant change to US compliance affect your firm?