10 Feb 2020
The lack of requirements to disclose a company’s beneficial ownership information is one of the top vulnerabilities in the U.S. financial system, the U.S. Treasury Department said in a new report.
The report, published Thursday by the Treasury’s Office of Terrorist Financing and Financial Crimes, identified several emerging threats and systemic vulnerabilities in the U.S. financial system that are being exploited by illicit actors, and laid out some ongoing efforts to address these issues.
The growing misuse of digital assets and the failure of foreign jurisdictions to effectively supervise digital assets activity, for instance, make up another vulnerability, according to the report.
“These are all vulnerabilities that reflect certain gaps in law…that need to be addressed,” said an administration official in a briefing call on the report. “We are, over the coming year, going to work on a bipartisan basis with Congress and with the private sector to undertake mitigation measures across the full spectrum of the topics that are covered in our strategy.”
Currently, there is no categorical obligation at the state or federal level requiring companies to disclose information on beneficial ownership at the time of their formation. The Treasury said criminals have continued to misuse legal entities to conceal assets and activities.
The Treasury’s Financial Crimes Enforcement Network, or FinCEN, in 2018 issued a rule that requires financial institutions regulated by the agency to identify and verify the beneficial owners of legal entity customers when they open accounts and at defined points thereafter. The initial examinations of compliance with this requirement haven’t shown significant deficiencies with the implementation, the Treasury said in the report.
The Treasury said it doesn’t, however, have the authority to require the disclosure and that addressing this gap needs legislative action.
Some limited-liability companies, sometimes referred to as shell companies, are registered in the U.S. under the names of representatives who neither own nor operate them. In an effort to crack down on this, the U.S. House of Representatives in October passed a bill requiring certain limited-liability companies to disclose their true owners.
Another major gap is the lack of comprehensive anti-money-laundering requirements on some financial institutions and gatekeeper professions. These include, for example, nonfederally insured credit unions and certain trust companies that aren’t subject to federal oversight and are exempt from the anti-money-laundering obligations, as well as professionals such as lawyers, according to the report.
By Mengqi Sun and Kristin Broughton, The Wall Street Journal, 6 February 2020
Read more at The Wall Street Journal
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