News
FinCEN Finalizes Beneficial Owner Rule Amid White House Transparency Push
By Colby Adams and Valentina Pasquali
printCORRECTION APPENDED: The U.S. Treasury Department finalized its long-awaited customer due diligence rule Friday shortly after the introduction by the White House of a bevy of corporate transparency-related measures. Beginning in May 2018, banks, brokers and dealers in securities, futures commission merchants and other U.S. financial institutions covered by the final rule must obtain identifying information on persons who own 25 percent or more of new corporate accounts, and then consider risk-based steps to confirm and periodically review the accuracy of the data. The beneficial ownership rule, initially pitched by the Financial Crimes Enforcement Network (FinCEN) in 2012 and formally...
TO READ THE FULL STORY
Subscribe
Learn More
Related News
Pending requirements that U.S. financial institutions more thoroughly vet their accountholders may especially challenge broker dealers, some of which are designing new systems to scrutinize investment advisers and others who control omnibus accounts and pooled investment vehicles, say sources.
A proposal that would restrict the authority of executive agencies and bureaus to promulgate rules is gaining steam in Congress, potentially creating limits on the ability of federal regulators to issue anti-money laundering, counterterrorist financing and other regulations going forward.
Federal cases against attorneys, accountants and other professionals suspected of washing illicit proceeds have risen by roughly 30 percent in the year since the FBI began actively targeting third-party facilitators, according to the head of the bureau's money laundering unit.
U.S. rules against illicit finance are, for the most part, sophisticated and comprehensive, but minimal regulation of attorneys, accountants and other nonbank firms constitute significant, longstanding loopholes that money launderers and terrorist financiers can exploit.
Many compliance officers may have never heard of "circular ownership"- a corporate structure of holding companies and subsidiaries that financial institutions often struggle to map out and unravel during the customer-onboarding process.
Several of the world's largest financial institutions have moved quickly to limit risks posed by their corporate clients in the six months since U.S. officials finalized a long-anticipated customer due diligence rule, while smaller lenders have treaded a rougher path towards implementation.
An intergovernmental group tasked with monitoring how effectively nations fight money laundering and terrorist financing is set to criticize the United States for failing to address several long-term deficiencies in the country's laws and regulations.
Competing U.S. proposals that would require companies to disclose their beneficial owners have gained unprecedented momentum in recent months, with no signs of a consolidated measure in sight.
A proposed reporting requirement for foreign-owned legal entities would impact a small but growing universe of companies that have likely been used to funnel illicit funds into the United States, say legal experts.
Recent U.S. efforts to further clamp down on corruption and offshore bribery are likely to translate into renewed scrutiny of bank relationships with high-risk clients, say attorneys.
Draft U.S. Treasury Department rules on customer due diligence requirements for financial institutions would not prevent criminals from exploiting shell companies, according to Elise Bean, former staff director and chief counsel of the Permanent Subcommittee on Investigations.
As the U.S. Treasury Department readies beneficial ownership rules for financial institutions, senators are weighing the introduction of two competing corporate transparency bills that would require disclosures by private companies.
The Obama administration is pushing lawmakers to introduce legislation that would require corporations to obtain tax identification data that could be turned over to investigators.
U.S. officials will formally propose this month a long-planned rule that would require banks to identify the owners of their corporate clients, according to an Office of Management and Budget schedule.
Intergovernmental plans to better identify corporate owners will do little to thwart financial crooks, even at great cost to banks and governments, according to an academic report on offshore financial flows.
U.S. Treasury Department officials are weighing whether to exempt trusts and offer more flexibility on verification requirements in an upcoming proposal that would impose data collection duties on corporate accounts held at banks.
Compliance with beneficial ownership standards will be one of the top priorities for Financial Action Task Force examiners during the group's next round of jurisdictional reviews, a U.S. official said Tuesday.
The U.S. Treasury Department said Wednesday that it was considering imposing customer due diligence currently applied to private banking and correspondent accounts to all accountholders at depository institutions.
The reduce the threat of shell companies, banks must ask questions to understand the nature of any business opening an account and should seek proof that the business produces something, says David Caruso, an AML compliance expert.