WASHINGTON/NEW YORK: The Obama administration is issuing a long-delayed rule requiring the financial industry to identify the real owners of companies and proposing a bill that would require companies to report the identities of their owners to the federal government, U.S. officials said on Thursday.
The Customer Due Diligence (CDD) rule, in the works since 2012, and the proposed legislation are meant to hinder criminals from using shell
companies to hide ownership and launder money, finance terror, and commit other threats to the global
financial system.
The use of shell
companies to hide assets and avoid taxes is in the spotlight following a massive leak of data from the
Panama-based law firm Mossack Fonseca, which embarrassed several world leaders and sparked government investigations around the globe into possible
financial wrongdoing by the wealthy elite.
The International Consortium of Investigative Journalists said it will release a searchable database of more than 200,000 offshore entities next week.
"Fundamentally our
financial system should **t provide the rich, the powerful, and the corrupt with the opportunity to
shield their assets," said Wally Adeyemo, the U.S. deputy national security advisor for international eco**mics, in a call
with reporters on Thursday.
"**body should be able to hide in the shadows from their legal obligations. "The final CDD
rule will require banks, brokers, mutual funds and other
financial institutions to collect and verify the identities of the
real people, or "beneficial owners," who own and control
companies when those
companies open accounts.
Financial
institutions will have to verify the identity of any person or company who owns more than 25 percent of the
company, and one live person who controls the company even if that person owns less than 25 percent. Banks will have two years to get their systems into compliance, said Jennifer Fowler, the U.S. Treasury deputy assistant secretary for terrorist financing.
The U.S. Treasury said in 2012 it planned to propose a
rule that would clarify and standardize
financial institutions´
obligations to k**w the identities of their customers.
But the proposal generated opposition from the
financial industry, which argued it would be costly, ineffective, and
difficult to implement because the United States lacks a national database of corporate information.
To address one of those industry concerns, Treasury will propose legislation
requiring companies to report to the
Treasury the identity of beneficial
owners when a company is incorporated.
The legislation would create a central registry of beneficial ownership, something the U.S. currently does **t have, Fowler said.
U.S. secretaries of state have lobbied against similar legislative action in the past, arguing that the Internal Revenue Service already has corporate ownership records that it could make available to law enforcement.
Adeyemo said the Obama administration had been "consulting actively" with secretaries of state. "This is a place where we need Congress to act," he said.
Taken together, the measures would make the
financial system more transparent and close loopholes that allow for abuse or illegal activity, officials said.
More than 1,000 prosecutions are brought each year in the United States for money laundering, Fowler said.
"This is a record that ** one in the world can match.
"But, she added, "there are vulnerabilities that we need to address in order to maintain an effective regime.
"The Treasury is also proposing a regulation that would increase requirements for some foreign-owned
companies operating in the United States to report information to the government, which officials said would prevent the use of those
companies for tax avoidance purposes.
In addition, the Justice Department is proposing amendments that would strengthen its ability to pursue foreign corruption cases, including issuing subpoenas for records in money laundering investigations, obtaining overseas records, and using classified information in civil cases.
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