Treasury Nears Rule to Force Banks to ID Shell Company Owners

  • Customer Due Diligence rule would close anonymity loophole
  • The maneuver is in the spotlight after leak of law firm files

The U.S. Treasury Department is close to issuing a final rule that would require banks, brokers and mutual funds to identify the owners hidden behind shell companies, a Treasury official said.

The use of shell companies to conceal assets drew renewed attention this week after a group of news organizations used a leak of millions of documents from a Panama law firm to report on how some of the world’s wealthiest people, including politicians and business figures, had channeled billions of dollars into offshore accounts.

U.S. regulations generally require that banks know their customers, but those rules haven’t forced institutions to identify who the ultimate beneficial owners are when accounts are set up by shell companies. The Customer Due Diligence rule would create an explicit requirement for banks and other financial institutions to determine the identities of anyone who owns 25 percent or more of a legal entity that opens an account, and anyone who controls such an entity.

The rule, first proposed in 2012, will be sent “very soon” to the government’s Office of Management and Budget for inter-agency review, said Steve Hudak, a spokesman for the Treasury’s Financial Crimes Enforcement Network. That process takes a maximum of three months.

The timing of the rule’s completion was reported earlier Wednesday by The New York Times, which cited FinCEN director Jennifer Shasky Calvery. A Times investigation last year detailed how a loophole in U.S. law allowed some people to anonymously purchase expensive real estate in New York.

The new rule would make clear to financial institutions that they must know and understand the beneficial ownership of their customers, Shasky Calvery told The Times, in comments confirmed by Hudak.

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