On December 7, 2022, the US Senate voted not to include the Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act in the 2023 defense budget. Initially introduced by a group of bipartisan lawmakers following the release of the Pandora Papers, the ENABLERS Act had been included as part of the National Defense Authorization Act (NDAA) earlier in 2022.
Responding to questions sent to Republican Senator Patrick Toomey, a Republican aide on the banking committee said the ENABLERS Act should go through regular legislative processes instead of being “tacked on” to a funding bill.
The ENABLERS Act
Passed by the US House of Representatives in July 2022, the ENABLERS Act intends to close existing loopholes used by kleptocrats by extending anti-money laundering (AML) requirements in the Bank Secrecy Act (BSA) to include professional service providers, or “gatekeepers.”
Under this amendment, newly covered entities, such as accountants, lawyers, and third-party payment services, would be required to:
- Identify and verify account holders, including establishing and maintaining written procedures that are reasonably designed to identify and verify beneficial ownership structures
- Maintain appropriate procedures to guard against corruption, money laundering, the financing of terrorism, or other forms of illicit finance
- Establish due diligence policies, procedures, and controls as described in the BSA
- Establish AML programs
- Report suspicious transactions
Gatekeeper Opposition
Voicing its opposition to the Act, the American Bar Association (ABA) said that the amendment could result in lawyers being required to report attorney-client privileged and other protected client information to the government. However, the Caucus Against Foreign Corruption and Kleptocracy stated the amendment would not violate attorney-client privilege, citing the ABA’s guidelines that already allow and encourage attorneys to report suspicions of criminal activity under a voluntary framework.
Having sent a letter of concern to Senate leaders in July, on October 5, ABA President Deborah Enix-Ross sent a further letter urging the Senate to oppose the ENABLERS Act amendment and its inclusion in the NDAA for the following reasons:
- The amendment has not been subject to a hearing or markup, as required by federal and state law, due to the extent of its potential impact on “perhaps most lawyers in the US”
- The amendment would impede existing efforts to combat money laundering and terrorist financing
- Requiring lawyers to submit suspicious activity reports (SARs) on their clients’ financial transactions would conflict with their ethical obligations and undermine the fundamental legal principles of confidentiality and attorney-client privilege that “have been central to the American legal system for centuries”
Key Takeaways
While the ENABLERS Act has not been signed into law at this time, firms should be aware that the legislation could still be included in the government’s omnibus spending bill for 2023, the deadline for which is December 16th. Failing this, the Act may be resubmitted next year as a standalone bill.
This article first appeared at Comply Advantage
Originally published 14 December 2022, updated 22 August 2024