Senate Overhauls AML Laws, Strengthens Beneficial Ownership Disclosure


On Friday (Dec. 11), the U.S. Senate passed legislation that would strengthen anti-money laundering (AML) rules. The legislation would also ban anonymous shell companies.

As reported by Reuters, the bill would mandate that companies have to report their beneficial owners to government authorities. In addition, the bill would promote more robust information-sharing between regulators and gives the Financial Crimes Enforcement Network (FinCEN) broader power to root out and punish attempts to skirt the regulations.

“The division imposes a civil penalty and authorizes criminal penalties — a fine, a prison term for up to three years, or both — for providing false or fraudulent beneficial ownership information or for willfully failing to provide complete or updated beneficial ownership information,” according to the legislation.

The bill, known as the Corporate Transparency Act, is part of the defense-funding legislation that earlier this month was approved by the House of Representatives. With the passage in the Senate, the bill heads for signature (or veto) by President Donald Trump. If vetoed, as noted by the newswire, the Senate has the votes in place to override that veto. That means the defense bill – and with it, the AML legislation – will become codified.

As reported in this space earlier in the month, the legislation would require U.S. corporations to register the identity of their beneficial owners in a database operated by FinCEN. Any individual who owns — either directly or indirectly — 25 percent or more equity interest in a legal entity would have to be identified.

In a statement provided to PYMNTS, the Bank Policy Institute (BPI) said that “this legislation warns the world that the U.S. will stop human traffickers, terrorists and other global criminals in their tracks when they attempt to infiltrate the financial system,” said BPI President and CEO Greg Baer.

The BPI pointed to a report from its predecessor organization, The Clearing House, which found in a report that the framework of the AML scheme that was put in place in 2017 “is outdated and thus ill-suited for apprehending criminals and countering terrorism in the 21st century.” Among the BPI recommendations back then: Congress should enact legislation that requires the reporting of beneficial owner information at the time of incorporation.

The BPI also reported on Friday that about 75 percent of small businesses surveyed stated that SMB owners should provide their personal information when forming their companies, which is part of the legislation.

Those measures, stated the report, would help alleviate some of the frictions and inefficiencies that have marked the AML framework that exists as an “amalgamation of statutes and regulations that generally derive from the Bank Secrecy Act, which was passed by Congress in 1970 with iterative changes since, and added to (but not reformed by) the USA PATRIOT Act, which was passed in 2001.”

Over the ensuing decade, the regime has not seen significant change, and has been built on bilateral reporting mechanisms that have in turn been grounded in analog technology dating back to the 1980s.

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