AML enforcement likely to be more strict under President Trump

Jeremy Byellin, JD

The inauguration of President-elect Trump is right around the corner, along with the wave of policy changes that will follow the new administration.

Although Donald Trump has proven difficult to predict over the past 18 months, most are reasonably certain that his administration will take a markedly different course than that taken by the Obama administration these past eight years, particularly in the area of regulation.

In spite of Trump’s substantially antiregulatory rhetoric on the campaign, however, organizations shouldn’t expect a significant decrease in anti-money laundering (AML) regulation. In fact, there may even be an increase in the stringency of the enforcement of AML regulations under the Trump administration.

While there are likely a number of reasons for this likelihood, three in particular emerge as the most prominent:

1. Hard line on terrorism

Throughout the campaign cycle and after the election, Trump has been persistent in his plan to deal with terrorism – and the Islamic State in particular – aggressively and harshly. Although this strategy may manifest most noticeably as military action, anti-money laundering regulations have long been a less apparent, but nonetheless effective, tool for fighting terrorism.

Indeed, 2001’s USA PATRIOT Act amendments to the Bank Secrecy Act that require financial institutions to establish anti-money laundering programs were enacted in direct response to the September 11 terrorist attacks. What’s more, both the PATRIOT Act and the Bank Secrecy Act were passed under Republican presidential administrations – an indication that AML regulations aren’t necessarily disfavored among politically conservative presidents.

With Trump’s vigorously anti-terrorism positions, it’s highly unlikely that anti-money laundering regulations and enforcement will shrink in any significant way. If anything, as a means of touting its tough stance against terrorism, the Trump administration is more likely to enforce AML regulations more harshly than the Obama administration.

2. Populist anti-Wall Street rhetoric

Despite his extensive background with the financial industry, Trump was propelled to electoral victory in November thanks in large part to his populist, anti-Wall Street language, which resonated among many working class voters in the so-called Rust Belt states.

For instance, in January 2016, Trump stated in a campaign speech in Ottumwa, Iowa, that “[he’s] not going to let Wall Street get away with murder. Wall Street has caused tremendous problems for us.” He went on to say that “we’re going to tax Wall Street” and that he “didn’t care about the Wall Street guys.”

This rhetoric, which was present throughout his campaign, contrasts starkly, of course, with many of his cabinet appointments, who are some of the wealthiest individuals ever to fill a presidential cabinet.

Nevertheless, given the success it has brought him at the polls, it’s unlikely that Trump’s populist message will deviate significantly once he begins making policy. Although he may yet unveil policies more in line with recognized conservative principles, such as generally lower taxes and regulations, he would still likely push for policies that he can use as proof of his status as a president for the people. And given the relatively low level of political backlash from supporting such policies, there’s no lower-hanging fruit in this regard than supporting stringent AML regulations.

3. Senator Jeff Sessions as Attorney General

Finally, and perhaps most tellingly, there is Trump’s selection of Alabama Senator Jeff Sessions for Attorney General.

Sessions served as an Assistant U.S. Attorney for the Southern District of Alabama from 1975 to 1977, and from 1981 to 1993, he served as the U.S. Attorney for the Southern District of Alabama. Reflecting on his time as a prosecutor, Sessions has commented on the need to take a hard stance against corporations and has further advocated for the prosecution of individuals in corporate wrongdoing cases.

Sessions also has taken an aggressive anti-terrorism stance as a senator, which has often translated into support for strengthening AML regulations.

Also in line with Sessions’ tougher stance on corporate wrongdoing is his seeming distaste for nonprosecution agreements (NPAs) or deferred prosecution agreements (DPAs), both of which have been a regular tool for the Obama administration’s enforcement agencies.

In short, organizations are likely going to find harsher AML regulatory terrain under President Trump and should prepare accordingly.