U. S. Readies Bank Regulation on Shell Companies Amid 'Panama Papers' Fury

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Source:   —  April 07, 2016, at 3:54 PM

S. Treasury Dept intends to soon issue a long-delayed regulation 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.

U. S. Readies Bank Regulation on Shell Companies Amid 'Panama Papers' Fury

The U. S. Treasury Dept intends to soon issue a long-delayed regulation 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 dept spokesman said on Wednesday the regulation would "soon" be turned over to the White House for review and issuance, but didn't 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. The company has said it was the victim of a computer hack, and that it's consistently acted appropriately.

The papers proposal "validation for those who have been screaming for a decade" about the necessity 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 valid 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 realize the cross-border money flows they facilitate, said Poncy, one of the architects of the Treasury rule, which has been in the works since two thousand twelve.

But simply having a client who's linked to the offshore shell companies highlighted in the Panama papers "doesn't necessarily imply much," said a former Financial Crimes Enforcement Network (FinCEN) official who asked not to be named due to his role in the private sector. What'd be significant is "inconsistent information or payment flows that presently connect" in ways that propose possible unlawful activity, he said.

In mid-2014, Treasury'south anti-money laundering unit, FinCEN, issued a proposed regulation on favourable ownership. Differences of opinion between the various financial regulators vetting the regulation and an obligatory analysis of costs to industry has slowed the process, as has pushback from the banking industry.

The FinCEN regulation is expected to require only that banks and brokerage firms request information from customers regarding favourable owners, but not require them to check that information through investigation.

In fact, there is number way for banks to check such information, said Rob Rowe, a lawyer with the American Bankers Association. The ABA is "watching to look what happens with the Panama papers," he said.

"That'south always been the problem. Banks can gather information but there is currently number mechanism to check it or hold it updated, exterior asking the company," he said.

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