As the two-year deadline approaches, help is proposed to meet upcoming anti-money laundering compliance requirements. A recent draft bill aims to assist banks and other regulated entities in complying with one of the most significant anti-money laundering requirements of the Final Rules on Customer Due Diligence Requirements (the “Rules”). The proposal will assist banks, brokers or dealers in securities, mutual funds, and futures commission merchants and introducing brokers in commodities in implementing greater customer due diligence measures.
The Rules, issued by the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury in 2016, will require banks and the other aforementioned entities to identify and verify the identity of beneficial owners of legal entity customers as of May 11, 2018. While there are exceptions to these Rules, in general, regulated entities will be required to identify the beneficial owner of accounts opened by such customers. Beneficial owners include individuals who own 25% or more of equity interests in, or have significant responsibility to control, manage, or direct, a legal entity customer.
The Draft Bill
The draft bill seeks to “improve information sharing between financial institutions” by creating a national database of companies and their beneficial owners. Each applicant to form a corporation or limited liability company under state law would be required to file a report with FinCEN containing a list of the beneficial owners of the company. The company would also be required to update the report within sixty days of a change in its beneficial owners and submit an annual filing containing information on its beneficial owners. Companies that employ more than twenty full-time employees or file income tax returns demonstrating more than $5,000,000 in gross receipts or sales are not covered by the bill.
Proponents of the bill believe this FinCEN database will incentivize and reduce the cost of compliance. Detractors suggest the smaller companies covered by the bill are not the major source of money laundering in the U.S.
As there are additional requirements, exceptions, and exclusions in the Rules, regulated entities should seek the advice of counsel to adapt or adopt compliance measures efficiently and effectively. In the meantime, those affected should monitor whether the draft bill will garner enough support to proceed through the legislative process.