A statue of Albert Gallatin stands outside the U.S. Department of the Treasury building in Washington, D.C., July 29, 2011.
Photo: Andrew Harrer/Bloomberg via Getty Images
The U.S. Treasury Department intends to soon issue a
long-delayed rule forcing banks to seek the identities of people behind
shell-company account holders, after the "Panama Papers" leak provoked a
global uproar over the hiding of wealth via offshore banking devices.
A department spokesman said on Wednesday the rule would
"soon" be turned over to the White House for review and issuance, but
did not confirm any timetable for the initiative, which has taken years.
Governments around the globe have launched probes into
possible financial wrongdoing after 11.5 million documents from the
Panamanian law firm Mossack Fonseca, nicknamed the "Panama Papers," were
leaked to the media and reports emerged Sunday. Mossak Fonseca has said
it was the victim of a computer hack, and that it has consistently
acted appropriately.
The papers offer "validation for those who have been
screaming for a decade" about the need for financial institutions in the
United States and elsewhere to address risks of money laundering,
terror finance and other crime by identifying people who clandestinely
control legal entities, former Treasury official Chip Poncy told
Reuters.
The leaked documents may give banks a glimpse into the kind
of information on true, or "beneficial" owners, that they regularly
should be obtaining to better understand the cross-border money flows
they facilitate, said Poncy, one of the architects of the Treasury rule,
which has been in the works since 2012.
But simply having a client who is linked to the offshore
shell companies highlighted in the Panama papers "doesn't necessarily
mean much," said a former FinCEN official who asked not to be named due
to his role in the private sector. What would be significant is
"inconsistent information or payment flows that now connect" in ways
that suggest possible illicit activity, he said.
In mid-2014, Treasury's anti-money laundering unit, the
Financial Crimes Enforcement Network (FinCEN), issued a proposed rule on
beneficial ownership. Differences of opinion between the various
financial regulators vetting the rule and an obligatory analysis of
costs to industry has slowed the process, as has pushback from the
banking industry.
The FinCEN rule is expected to require only that banks and
brokerage firms request information from customers regarding beneficial
owners, but not require them to verify that information through
investigation.
In fact, there is no way for banks to verify such
information, said Rob Rowe, a lawyer with the American Bankers
Association. The ABA is "watching to see what happens with the Panama
papers," he said.
"That's always been the problem. Banks can collect
information but there is currently no mechanism to verify it or keep it
updated, outside asking the company," he said.
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