Enablers Act: Definition and Consequences

U.S. lawmakers reassessed their approach to anti-money laundering (AML) rules in the wake of the Pandora Papers controversy. The Enabling Risks to Security and Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act expanded the scope of AML legislation to include a greater number of professions and sectors, including some that were previously disregarded, in an attempt to improve their effectiveness and comprehensiveness. The Enablers Act’s consequences for professional service providers will be discussed in this article.

An overview of the ENABLERS Act and its meaning are discussed in this article.

The ENABLERS Act: What is it?

A group of MPs from both parties first submitted the ENABLERS Act in October 2021 in reaction to the publication of the Pandora Papers. The act expanded the scope of anti-money laundering (AML) regulations to include professional service providers such as accountants, attorneys, and third-party payment services to plug gaps that permitted “enablers” to launder illicit cash in the United States. This addition is also aimed to promote greater openness and hold these experts responsible.

By July 2022, the ENABLERS Act had been amended by the House of Representatives and was incorporated into the National Defense Authorization Act. But on December 7, 2022, the Senate rejected the act’s inclusion in the defense budget, putting a temporary stop to its advancement. However, given the continued concerns about financial crime, it is probable that comparable legislation will be adopted in 2023 or the years that follow.

Also, a specific AML provision of the U.S. Bank Secrecy Act, known as the ENABLERS Act, would impose strict “enabling” due diligence requirements on professionals and individuals working in the business and financial sectors, as defined by 31 USC § 5312(a)(2), which covers the regulatory definition of “financial institution” and “financial activity.” In one of the most complex areas of AML/CFT, the ENABLERS Act also mandates that the U.S. Department of the Treasury offer tools for tracking and confirming the source of money.

This legislation would involve the Enablers Act.

Financial advisors
Dealers in art and antiques
Attorneys engaged in business ventures and law firms
Notary engaged in business dealings
Companies that offer accounting and business services
Communication specialists and third-party payment processors
Professionals who work for compensation, offering advice on investments
Providers of trust services (trusts and several business entities)

The ENABLERS Act’s Consequences for Professional Service Providers

Initially, professional service providers who might aid in money laundering and other illegal financial operations were the focus of the ENABLERS Act. The initial act greatly expanded the range of industries impacted by applying to the following categories of businesses and professionals:

Lawyers, legal practices, and notaries
Companies and trusts that offer services
Suppliers of third-party payment services
Financial advisors
Vendors of artwork, vintage items, and memorabilia
National title insurance providers
Professionals in PR, marketing, and communications
Public accounting businesses and certified public accountants (CPAs)

The amended act narrowed down the types of professional service providers to balance efficacy and regulatory burdens. For example, it left out dealers of artwork and antiques. However, due to their crucial role in financial planning, a large number of professional services providers delivering legal and financial services were still covered.

What Steps Can You Take Right Now to Get Ready for the Enablers Act’s Passing?

Gatekeepers for professional services should quickly review and evaluate their risk management and compliance programs. They should pay special attention to their client data management, monitoring, and due diligence procedures during client onboarding. Risk management involves time and effort, but methods and technologies can reduce workload, expedite procedures, and improve productivity.

The majority of law, accounting, and consulting firms already have policies in place for governance oversight and risk management; however, the degree of rigor and complexity of these systems varies depending on the size of the firm, the client sector it serves, the services it offers, and the geographic area it serves. Although the solutions don’t work for everyone,

Businesses will need to blaze their trail, but they may do so by concentrating on three crucial areas:

Process: It’s time to take a close look at the policies and procedures in place, including the overall governance structure and the risk and compliance protocols for onboarding new clients, resolving conflicts, assessing risks related to taking on new business, tracking engagement performance, and managing client relationships. In addition, you may create a review schedule and compare the newly suggested requirements with a gap analysis.

Individuals: Not all functions should be responsible for preparing for the new regulatory standards, just the risk and compliance team. However, a comprehensive approach to assessing a company’s risks, competencies, and staffing needs involves conducting a cross-functional assessment of the customer lifecycle and all touchpoints. Staff can also focus on higher-value work by identifying inefficiencies, upskilling employees, and improving team resources to increase capacity and meet increased requirements.

Technology: As required by the proposed legislation, it’s imperative to ascertain whether the software your company currently uses is enough to handle more comprehensive tracking, larger data sets, and improved reporting. Use this chance to reevaluate the software tools your company is presently using, assess manual or paper-based processes, and identify high-risk areas where human error could occur and where automation and systems integration could reduce risks and facilitate the adoption of new regulations.

Enablers Act: FAQs

Which Are the Main Money Laundering Offenses?

The UK’s Proceeds of Crime Act of 2002 categorizes money laundering charges into acquisition, use, possession, hiding, and arranging.

What Does the Anti-money Laundering Act Aim to Achieve?

Anti-Money Laundering (AML): What is it? Policies, laws, and regulations of anti-money laundering (AML) are designed to deter financial crimes and illicit activities by criminals. To stop financial crimes and illegal activity, local and global regulators are set up all over the world. These regulators also create rules.

Which Four Components Make Up Money Laundering?

The acquisition of funds by illicit means and the subsequent manipulation and integration of these unlawfully acquired assets into the authorized financial system—often accomplished through a convoluted process of placement, layering, and integration—are the fundamental components of money laundering.

Is It Illegal to Launder Money?

Money laundering is the act of concealing financial assets to prevent their illicit origin from being identified and their use. Criminals also use money laundering to convert illegal financial gains into legitimate funds.

Wrapping Up

Experts have warned professional service organizations in the United States to prepare for money laundering legislation for years. And it’s now impossible to disregard those cautions over the past few months.

The U.S. sponsored the Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act in July 2022, sending the most recent audible warning. House of Representatives. The bipartisan measure extends anti-money laundering (AML) monitoring from banking institutions to professional services organizations, targeting “gatekeepers.” It would oblige accounting and legal firms to gather, maintain track of, and disclose particular customer information.

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