BY BRETT WOLF
The U.S. Treasury
Department intends to soon issue a long-delayed rule 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
department spokesman said on Wednesday the rule would "soon" be
turned over to the White House for review and issuance, but did not 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. Mossak Fonseca has said it was the victim of a computer hack, and that
it has consistently acted appropriately.
The
papers offer "validation for those who have been screaming for a
decade" about the need 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 legal 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 understand the cross-border money flows
they facilitate, said Poncy, one of the architects of the Treasury rule, which
has been in the works since 2012.
But simply having a client who is linked to
the offshore shell companies highlighted in the Panama papers "doesn't
necessarily mean much," said a former FinCEN official who asked not to be
named due to his role in the private sector. What would be significant is
"inconsistent information or payment flows that now connect" in ways
that suggest possible illicit activity, he said.
In mid-2014, Treasury's anti-money
laundering unit, the Financial Crimes Enforcement Network (FinCEN), issued a
proposed rule on beneficial ownership. Differences of opinion between the
various financial regulators vetting the rule and an obligatory analysis of
costs to industry has slowed the process, as has pushback from the banking
industry.
The FinCEN rule is expected to require only
that banks and brokerage firms request information from customers regarding
beneficial owners, but not require them to verify that information through
investigation.
In fact, there is no way for banks to
verify such information, said Rob Rowe, a lawyer with the American Bankers
Association. The ABA is "watching to see what happens with the Panama
papers," he said.
"That's always been the problem. Banks
can collect information but there is currently no mechanism to verify it or
keep it updated, outside asking the company," he said.
(Reporting by Brett Wolf of Thomson Reuters
Regulatory Intelligence; Editing by Randall Mikkelsen, Bernard Orr)
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