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FinCEN moves against anonymous companies

The Treasury Department's Financial Crimes Enforcement Network (FinCEN) wants to amend Bank Secrecy Act (BSA) regulations to stop the use of anonymous companies that FinCEN says are now used to launder criminal proceeds.

FinCEN issued a Notice of Proposed Rulemaking that would strengthen customer due diligence obligations of financial institutions and add a new requirement to know and verify the identities of the real people (also known as beneficial owners) who own, control, and profit from the companies they service.

"The beneficial ownership requirement is intended to provide us with an important new tool to track down the real people behind companies that abuse our financial system to secretly move and launder their illicit gains," said David S. Cohen, Under Secretary for Terrorism and Financial Intelligence, in FinCEN's release.

"Along with meeting our international commitments, this rule would make our financial system more transparent by exposing the activities of illicit actors who will no longer be able to hide behind their anonymity." 

The proposed amendments would be significant enhancements to the BSA and build upon post-9/11 augmentation of the regulations designed to protect the U.S. financial system, the FinCEN said.  

The rulemaking outlines the customer due diligence that will be expected: (1) identifying and verifying the identity of customers; (2) identifying and verifying the beneficial owners of legal entity customers; (3) understanding the nature and purpose of customer relationships; and (4) conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions. 

Covered financial institutions will need to collect beneficial ownership in a standardized format by identifying and verifying any individual who owns 25 percent of more of a legal entity, and the individual who controls the legal entity.


Julie DiMauro is the executive editor of FCPA Blog and can be reached here.