The ENABLERS Act: An Overview of AML Legislation for Professional Service Providers

Following the Pandora Papers scan­dal, U.S. leg­is­la­tors reeval­u­at­ed their approach to anti-mon­ey laun­der­ing (AML) reg­u­la­tions. The Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act was an effort to make AML reg­u­la­tions more effec­tive and com­pre­hen­sive by extend­ing AML require­ments to a wider range of indus­tries and pro­fes­sions, includ­ing those often over­looked in the past.

This arti­cle pro­vides an overview of the ENABLERS Act, its far-reach­ing impli­ca­tions for pro­fes­sion­al ser­vice providers, the poten­tial bur­dens it impos­es, and the pos­si­ble future of sim­i­lar AML legislation.

What is the ENABLERS Act?

The ENABLERS Act was ini­tial­ly intro­duced in October 2021 by a bipar­ti­san group of law­mak­ers in response to the release of the Pandora Papers. The act aimed to close loop­holes that allowed “enablers” to laun­der illic­it funds in the U.S. by extend­ing anti-mon­ey laun­der­ing (AML) require­ments to pro­fes­sion­al ser­vice providers, includ­ing accoun­tants, lawyers, and third-par­ty pay­ment ser­vices. This exten­sion sought to hold these pro­fes­sion­als account­able and encour­age greater transparency.

The House of Representatives passed a revised ver­sion of the ENABLERS Act in July 2022, by which point it had been includ­ed in the National Defense Authorization Act. However, on December 7, 2022, the Senate vot­ed against the act’s inclu­sion in the defense bud­get, end­ing its progress for the time being. Nevertheless, it is pos­si­ble that sim­i­lar leg­is­la­tion will be intro­duced in 2023 or the fol­low­ing years, reflect­ing ongo­ing con­cerns about finan­cial crime.

For infor­ma­tion on addi­tion­al leg­is­la­tion, view our time­line of key BSA/AML Regulations.

Implications of the ENABLERS Act for Professional Service Providers

The ENABLERS Act ini­tial­ly tar­get­ed pro­fes­sion­al ser­vices providers who have the poten­tial to facil­i­tate mon­ey laun­der­ing and oth­er illic­it finan­cial activ­i­ties. The orig­i­nal act applied to the fol­low­ing types of com­pa­nies and pro­fes­sion­als, sig­nif­i­cant­ly broad­en­ing the scope of indus­tries affected:

• Attorneys, law firms, and notaries
• Trusts and com­pa­ny ser­vice providers
• Third-par­ty pay­ment ser­vice providers
• Investment advi­sors
• Sellers of art, antiques, and collectables
• Domestic title insur­ance companies
• PR, mar­ket­ing, and com­mu­ni­ca­tions professionals
• Certified Public Accountants (CPAs) and pub­lic account­ing firms

A revised act reduced the types of pro­fes­sion­al ser­vice providers that were cov­ered in an effort to bal­ance reg­u­la­to­ry bur­dens with effec­tive­ness. It omit­ted, for exam­ple, arts and antiq­ui­ties sell­ers. However, many pro­fes­sion­al ser­vices providers offer­ing finan­cial and legal ser­vices con­tin­ued to be cov­ered because of the crit­i­cal role they play in finan­cial planning.

Extending AML Requirements to Accountants, Lawyers, and Third-Party Payment Services

If the ENABLERS Act or sim­i­lar leg­is­la­tion were to become law, impact­ed com­pa­nies would be oblig­at­ed to:

• Establish Know Your Customer (KYC) pro­ce­dures to dis­cov­er and ver­i­fy ben­e­fi­cial own­er­ship struc­tures of their clients
• Implement pro­ce­dures to guard against cor­rup­tion, mon­ey laun­der­ing, ter­ror­ist financ­ing, and oth­er forms of illic­it finance
• Follow the guide­lines for due dili­gence described in the Bank Secrecy Act (BSA)
• Establish anti-mon­ey laun­der­ing pro­grams to ensure com­pli­ance with legal requirements

The ENABLERS Act would impose strin­gent com­pli­ance mea­sures on pro­fes­sion­al ser­vices com­pa­nies, giv­ing them oblig­a­tions that pre­vi­ous­ly applied only to mon­ey ser­vices com­pa­nies like banks. They would be required to per­form due dili­gence on their clients, main­tain records, and report sus­pi­cious activ­i­ties to the author­i­ties to pre­vent mon­ey laun­der­ing and oth­er illic­it finan­cial activities.

Opposition to the ENABLERS Act

There were many objec­tions to the ENABLERS Act, but per­haps the most stri­dent orig­i­nat­ed in the legal pro­fes­sion. The American Bar Association (ABA) argued that the amend­ment could require lawyers to report priv­i­leged infor­ma­tion to gov­ern­ment agen­cies, poten­tial­ly com­pro­mis­ing attor­ney-client confidentiality. 

Other pro­fes­sion­als com­plained that their indus­try had no expe­ri­ence in anti-mon­ey laun­der­ing and would be unable to imple­ment the required process­es effec­tive­ly, lead­ing to increased costs and admin­is­tra­tive burdens.

The Prospects for a Resurrected ENABLERS Act in 2023

Despite being blocked by the Senate, the ENABLERS Act could still be resub­mit­ted as a stand­alone bill. The act received bipar­ti­san sup­port last year, which could increase its chances of being rein­tro­duced for con­sid­er­a­tion by lawmakers.

If con­cerns about mon­ey laun­der­ing, finan­cial crime, and cor­rup­tion con­tin­ue to be press­ing issues, it is pos­si­ble that the ENABLERS Act or sim­i­lar leg­is­la­tion could be revis­it­ed in 2023, par­tic­u­lar­ly if anoth­er inci­dent like the Pandora Papers re-ignites pub­lic and media oppo­si­tion to mon­ey laun­der­ing. Lawmakers will need to bal­ance the need for effec­tive AML mea­sures with the poten­tial bur­dens on the affect­ed industries.

Conclusion

The ENABLERS Act rep­re­sents a sig­nif­i­cant shift in the reg­u­la­to­ry land­scape for pro­fes­sion­al ser­vice providers. While the act aims to strength­en anti-mon­ey laun­der­ing mea­sures, it would also bur­den pro­fes­sion­al ser­vices com­pa­nies con­sid­er­ably, requir­ing them to nav­i­gate and com­ply with com­plex AML require­ments. As a result, these com­pa­nies will need to be pre­pared for the pos­si­bil­i­ty of increased reg­u­la­tion in the com­ing years, and be ready to adapt their prac­tices accord­ing­ly to min­i­mize risk and main­tain compliance.

Preparing for increased reg­u­la­tion from a res­ur­rect­ed ENABLERS Act, or oth­er new leg­is­la­tion requires a robust yet adapt­able com­pli­ance pro­gram. Alessa’s AML com­pli­ance soft­ware strength­ens exist­ing com­pli­ance pro­grams while also allow­ing greater flex­i­bil­i­ty. Contact us today for a free demo of how our var­i­ous com­pli­ance mod­ules work togeth­er to increase your com­pli­ance program’s speed and accuracy.

The orig­i­nal arti­cle first appears at ALESSA

H.R.5525 — ENABLERS Act