In a fresh attempt to fight financial crime, the US Treasury has proposed a new rule that will force financial institutions to identify the beneficial owners of companies when they open accounts.
Put forward by the Treasury’s Financial Crimes Enforcement Network (FinCEN), the proposal reinforces existing due diligence requirements whilst also demanding that financial institutions find out and verify the identities of those that own, control and profit from the companies they offer services to. “FinCEN’s expectation is that a financial institution will identify the natural person or persons who exercise control of a legal entity customer through a 25% or greater ownership interest, regardless of how many corporate parents or holding companies removed the natural person is from the legal entity customer,” the Treasury said.
The aim is to fight money laundering, funding of terrorist activity and other illegal activity from running through the US financial system by preventing the use of anonymous or shell companies.
According to the Treasury, the proposal represents “significant enhancements” to requirements mandated under the Bank Secrecy Act. It will make it easier for financial institutions and law enforcers to identify criminal assets and accounts and alert them to national security threats as well as strengthening the country’s commitments under the G-8 Action Plan to increase the transparency of customer ownership. “Understanding who the customer is a basic cornerstone of know-your-customer due diligence,” said one senior administration official.
According to Fred Curry, a principal at Deloitte Financial Advisory Services LLP, the proposed rule “pierces the corporate veil.”
“This is a powerful piece of [rule-making] as far as transparency and raising the principle of know-your-customer are concerned,” he said.
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