New ENABLERS Act will bring Art Dealers, PR firms, lawyers and trust companies under BSA/AML rules

Art dealers, lawyers and other professional services firms could soon be regulated under the Bank Secrecy Act (BSA) and be required to report client information to the U.S. Government following an amendment to the definition of “financial institution”.

The U.S. House has passed the National Defense Authorization Act (NDAA), and within it, is the Establishing New Authorities for Business Laundering and Enabling Risks to Security Act (ENABLERS Act) - the most significant update to U.S. anti-money laundering regulations since the PATRIOT Act was passed in 2001.

The NDDA follows President Biden’s calls for Congress to extend U.S. anti-money laundering regulations to non-bank professionals and The ENABLERS Act proposes to change the BSA’s definition of “financial institution” to include trust companies, art dealers, lawyers, accountants and other non-bank market participants.

It proposes to subject these businesses to the same regulatory obligations as banks, including requiring them to design compliance frameworks, undertake extensive suspicious activity reporting (SAR), anti-money laundering checks, due diligence, account identification, and client verification.

Advocates of the ENABLERS Act say it will help U.S. law enforcement better identify and freeze assets held by sanctioned individuals – with the current sanctions on Russian oligarchs cited as a catalyst to the amendment. Rep. Joe Wilson  - who co-led the movement to enact the ENABLERS Act – said “middlemen in foreign transactions should be subject to the same anti-money laundering checks as banks.”

However, not everyone is happy about the change, most notably lawyers, with the National Bar Association stating it has ‘significant concerns’ about the implications for client confidentiality. In a letter sent to both the House and Senate, ABA President Reginald Turner said: “If lawyers are required to submit suspicious activity reports on their clients’ financial transactions and divulge privileged or other protected client information to the government, this will undermine the principle of lawyer-client confidentiality, discourage clients from consulting with their lawyers, and jeopardize lawyers’ unique ability to prevent money laundering before it occurs.”

But Martin Cheek, managing Director at SmartSearch says that in the UK and other regions, lawyers and other professional services firms such as accountants have been subject to AML reporting rules for some time, and there are no issues with confidentiality if the checks are done properly.

“Any firms engaging in financial activities that could be manipulated by bad actors should be subject to AML rules because there is a high risk they could be targeted by money launderers.

“The UK has a very stringent AML framework and firms other than traditional ‘financial institutions’ have been subject to AML requirements for years, and there are no issues with client attorney privilege because that is not what this is about. It is about preventing money laundering and to do that properly you need to have a full understanding of who your clients are.”

Cheek says U.S. firms that are due to become regulated under the ENABLER Act should act now, so that when the rules come into place they are able to easily meet their obligations.

“The fact of the matter is, there is already a risk, whether the Act is in place or not, and even if they do not yet have a legal obligation, any businesses dealing with client funds certainly have a moral obligation to run proper due diligence to establish exactly who that client is and where their funds are coming from.

“We offer a fully comprehensive AML service that meets U.S. and UK regulations. It is an all-in-one AML platform that identifies, verifies – using the latest biometric and facial recognition technology – and screens clients all from one place. It then hosts all check data and monitors every client on a daily basis for any changes to their status, ensuring the firm is always fully compliant.”

To find out how to get ahead of the ENABLER Act and make compliance with BSA easy and efficient, visit https://www.smartsearch.com/us