The Biden administration is days away from kicking off a sweeping crackdown on financial crime that will impact tens of millions of businesses. It may just be the beginning for a bipartisan group of lawmakers — agitated by separate concerns over cryptocurrency — who want to tighten anti-money laundering safeguards even further next year. It’s all coming together to make 2024 a critical moment for the Bank Secrecy Act, a 53-year-old law that’s morphed many times over the decades and is back at the top of the Washington policy debate. As you read this, the Treasury Department is gearing up to implement an historic set of rules, years in the making, that will require an estimated 32 million business entities to disclose their ownership details after Jan. 1. Congress enacted the policy in 2021 in a bid to clamp down on anonymous shell companies that have been used to evade taxes, facilitate money laundering and fund terrorism. Officials have had to balance concerns about privacy with demands for the data to be useful to law enforcement and banks that are supposed to act as the first line of defense against money laundering. Treasury’s Financial Crimes Enforcement Network initially faced criticism from transparency advocates and lenders that access to the data would be too restrictive. On Thursday, as the eve of the new reporting regime neared, FinCEN revised the access rules and said it would ease some of those limitations, particularly so banks could use the ownership information for a broader range of purposes to combat money laundering and comply with sanctions. The move, in turn, may have triggered a fresh backlash. House Financial Services Chair Patrick McHenry, who has vowed to make anti-money laundering rules a top oversight priority next year, said he remained concerned about “overly broad access and inadequate data security protections.” McHenry is calling on the administration to delay the reporting requirement’s Jan. 1 launch, in part because “millions of small business owners remain unaware of their beneficial ownership reporting obligations.” Dozens of other House and Senate Republicans have also called for a delay. Treasury is well aware of the daunting public awareness challenge before it. A FinCEN official told MM that one of the agency’s main priorities is educating business owners and that critical to that effort will be a “robust public outreach campaign.” The official acknowledged that many business owners have never heard of FinCEN. On Capitol Hill, a bipartisan group of lawmakers concerned about crypto’s use in terrorism and other financial crimes are pressing to further beef up FinCEN’s responsibilities in the coming year. Sens. Elizabeth Warren and Roger Marshall, with support from 18 other co-sponsors, have legislation that would extend BSA obligations to digital asset wallet providers, miners and other crypto entities. Warren argues her bill is in line with a recent call by Treasury to expand anti-money laundering rules in the crypto space. Sens. Mark Warner, Jack Reed, Mike Rounds and Mitt Romney have a separate pair of bills to tackle money laundering concerns in decentralized finance and to expand the reach of financial sanctions. “Recent events — from Ukraine to the Middle East — make clear that the bad guys never sleep,” Warner told MM. The crypto industry is gearing up to fight back against proposals — especially Warren’s — that it says are overly broad and threaten the viability of the U.S. digital asset sector. Some advocates are laying the groundwork for a potential legal challenge against the BSA itself. The Coin Center think tank has produced analyses outlining potential constitutional weaknesses of the BSA. Coin Center research director Peter Van Valkenburgh told MM that the group is happy so far with the limited approach to digital assets taken by FinCEN, the agency tasked with enforcing the BSA. It has spared bitcoin miners, the users of self-hosted wallets and software developers from BSA reporting requirements. “If FinCEN changed policy, which they haven’t yet, or if main Treasury overruled FinCEN — if they were a bit more hostile to the technology — we would then challenge that directly,” he said You made it — Happy Friday. Thank you so much for reading MM this year. The newsletter will return Jan. 2. Until then, keep sending tips to zwarmbrodt@politico.com.
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