Securities Regulation Daily Wrap Up, BENEFICIAL OWNERSHIP—Industry support sought for requiring companies to report beneficial owners, (May 20, 2016)
Organizations Mentioned:Financial Crimes Enforcement Network | Institute of International Bankers
Financial Crimes Enforcement Network (FinCEN) Deputy Director Jamal El-Hindi asked the financial sector to support draft legislation to that would require companies to provide beneficial ownership information at the company formation stage. Speaking at the Institute of International Bankers Annual Anti-Money Laundering Seminar, he contended that a centralized database will make information more easily available to law enforcement than would separate collection efforts undertaken by the states.
“Given the ways in which we regularly observe legal entities, such as shell companies, being used to mask identities for illicit purposes, we simply cannot abide by the status quo,” El-Hindi warned. The proposed legislation, he said, would increase transparency of companies formed in the United States regardless of where they conduct their financial activity.
Regarding suggestions that information could be obtained directly from the states if the states required it at the time of a company’s formation, El-Hindi pointed out the failure of these prior legislative efforts. If companies are required to provide beneficial ownership information to the federal government, he asserted, “it will likely be easier for financial institutions to obtain similar information from the legal entities as part of the financial institutions’ customer due diligence.”
Commenting on FinCEN’s issuance of customer due diligence requirements for financial institutions, El-Hindi touted the increased transparency and the creation of a rule-based, level playing field for the collection of beneficial ownership information. “As institutions implement the standards set by the new rule,” he said, “we will reduce the concerns that some of you have expressed about your competitors asking fewer questions than your own institutions, or conducting weaker customer due diligence, and thereby potentially making themselves more attractive to persons seeking banking services while weakening everyone else’s ability to identify bad actors.”
Companies: Institute of International Bankers
RegulatoryActivity: BeneficialOwnership FinancialIntermediaries