On May 5, 2016, the Obama Administration announced1 several executive branch actions intended to combat money laundering and enhance financial transparency, including the publication of a long-awaited final rule from the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) that will require financial institutions—including banks, broker-dealers, mutual funds, futures commission merchants, and introducing brokers—to identify and report the “beneficial ownership” of their customers for the first time.2
In conjunction with the FinCEN final rule—formally known as Customer Due Diligence (CDD) Requirements for Financial Institutions—the Internal Revenue Service (IRS) released a proposed rule3 that would require foreign-owned entities that are “disregarded entities” (i.e., entities with one owner that are not recognized for tax purposes as entities separate from their owners, including single-member limited liability companies (LLCs)) to obtain an employer identification number (EIN) from the IRS. The IRS believes that this rule will strengthen its ability to prevent the use of these entities for tax avoidance purposes.
Finally, the Administration released two legislative proposals intended to strengthen anti-money laundering (AML) efforts:
- A proposal from the Treasury Department4 that would require legal entities to report information on beneficial ownership at the time of a company’s creation, which it believes would help law enforcement to prevent and investigate financial crimes
- A proposal from the Department of Justice (DOJ)5 that they believe would enhance law enforcement’s ability to prevent bad actors from concealing and laundering illegal proceeds
Taken together, these regulatory and legislative developments represent a significant attempt to strengthen the Bank Secrecy Act (BSA) and enhance other AML efforts.
Continue reading “FinCEN finalizes rule on customer due diligence for financial institutions; Obama Administration takes other AML-related actions”