The Anti-Money Laundering Act of 2020

A Continuation of the Erosion of Financial Freedom

The Anti-Money Laundering (AML) Act of 2020, passed as part of the National Defense Authorization Act, is yet another chapter in the ongoing story of financial regulation that, while ostensibly aimed at combating crime, continues to reduce the personal freedoms of law-abiding citizens. In the name of stopping illicit activities such as money laundering and terrorism financing, this legislation significantly expands the government’s power to monitor and control financial transactions, blurring the line between necessary oversight and overreach. As explored in my post, The Erosion of Financial Freedom (Bitcoin Fortress), this act fits neatly into a long history of laws that incrementally tighten control over the flow of money and, by extension, individual liberty:

The New FINCEN Reporting Requirements

One of the key aspects of the AML Act of 2020 is the new Financial Crimes Enforcement Network (FINCEN) reporting requirements for Limited Liability Companies (LLCs) and other business entities. These provisions mandate that businesses file detailed reports on their beneficial owners—defined as anyone who directly or indirectly controls 25% or more of the company’s equity. This reporting includes sensitive personal information such as names, birthdates, addresses, and identifying numbers, all of which are collected in a federal database controlled by FINCEN.

The idea behind this requirement is to combat the use of shell companies for illegal purposes, but the reality is that it imposes significant burdens on small business owners and individuals who have no intention of breaking the law. With limited exceptions for certain categories of companies, nearly all LLCs are required to comply, including those that are dormant or inactive.

Financial Penalties and Limited Exceptions

The penalties for failing to file these reports, or for filing them inaccurately or late, are severe. Businesses can face civil penalties of up to $500 per day for non-compliance, with criminal penalties of up to $10,000 and two years in prison for willful violations. Given the complexity and detail required for compliance, even minor mistakes could lead to hefty fines, disproportionately impacting smaller businesses that lack the resources for full-time legal and financial advisers.

The limited exceptions to this rule are narrow. Large companies with more than 20 full-time employees and over $5 million in annual revenue are exempt, as are companies already subject to extensive federal reporting under other regulatory frameworks. However, the vast majority of small and medium-sized businesses—precisely the kinds of enterprises that drive innovation and economic growth—are not exempt and are forced to comply with these new, invasive regulations.

The All-Seeing Eye: A Surveillance State for Financial Transactions

This legislation is a stark reminder of the expanding surveillance state. The government’s increasing ability to monitor financial transactions, ostensibly for national security and law enforcement purposes, has evolved into a tool for blanket surveillance of the populace. The all-seeing eye of regulatory agencies like FINCEN watches over every financial move, collecting vast amounts of personal data. This data is stored in centralized databases, vulnerable to breaches and misuse, all while citizens are treated as suspects in a system that prioritizes control over privacy.

This trend, as I discussed in my post on The Erosion of Financial Freedom, is part of a larger pattern. We’ve seen it before with the Bank Secrecy Act of 1970, the Patriot Act of 2001, and now the AML Act of 2020. In each case, these laws are presented as necessary tools for fighting crime, but they have done more to erode the freedoms of ordinary citizens than to stop the criminals they were supposedly targeting. The creation of massive surveillance and reporting infrastructures places undue burdens on individuals and businesses while granting extraordinary power to the state.

Conclusion: The Cost of Security

While there is no question that money laundering, terrorism, and other criminal activities need to be addressed, the ongoing expansion of financial surveillance in the name of security poses a significant threat to personal freedom. The Anti-Money Laundering Act of 2020, with its harsh penalties for non-compliance and intrusive reporting requirements, continues this trend of prioritizing control over privacy. As more regulations are implemented, the financial system becomes a mechanism of surveillance rather than a neutral facilitator of commerce.

In the end, we must ask ourselves: How much freedom are we willing to sacrifice for the sake of security? And at what point do these measures become counterproductive, stifling the very economic innovation and personal liberty they are supposed to protect? The all-seeing eye may keep criminals in check, but its gaze falls equally on the law-abiding, reminding us that the price of security is often our most basic freedoms.

Not financial or legal advice, for entertainment only, do your own homework.  I hope you find this post useful as you chart your personal financial course and Build a Bitcoin Fortress in 2024.    

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