3. The following legal persons shall be subject only to the checkpoint of the beneficial ownership requirement: At the same time, legal persons can be misused to conceal and facilitate illegal activities. As Congress recognized in the CTA, „malicious actors seek to conceal their ownership of corporations, limited liability companies, or other similar entities in the United States to facilitate illicit activities, including money laundering, terrorist financing, proliferation financing, serious tax evasion, human and drug trafficking, and illicit drug trafficking, and counterfeiting, piracy, securities fraud, financial fraud and foreign bribery […] [6] In addition, Congress noted that „money launderers and others involved in business activities intentionally conduct transactions through corporate structures to evade exposure and may stratify these structures. In different secret jurisdictions, so that whenever an investigator receives ownership records for a domestic or foreign company, the newly identified entity is another business entity, requiring a repeat of the same process. [7] The possibility to act on behalf of a legal person and to receive financial services without revealing the identity of the natural persons who own or control the company – the natural persons whose interests are most directly served by the legal person – allows these natural persons to conceal their interests. As FinCEN has previously pointed out, such obfuscation „facilitates crime, threatens national security, and endangers the integrity of the financial system.” [8] (43) How can FinCEN best reach financial institutions to ensure the efficiency and effectiveness of the process by which financial institutions can potentially access beneficial ownership information held by FinCEN? The beneficial ownership rule goes further and describes the organizational structure of the beneficial owners of the legal entity – there is a control pin and a subsequent ownership clamp. The control pincer, of which there must be one, is the person with the greatest control and responsibility over the account, such as a CEO, chief operating officer or company president. Property is any person who owns 25% or more of the shares in the account. In addition to expanding the number of identified controlling persons of a corporation, the definition of the proposed substantial control rule increases the forms of authority that can make a person a beneficial owner. 16. See U.S.
Money Laundering Threat Assessment Working Group, U.S. Money Laundering Threat Assessment, pp. 48-49 (2005), www.treasury.gov/resource-center/terrorist-illicit-finance/documents/mlta.pdf. See also Miller, Rena S. and Rosen, Liana W., Beneficial Ownership Transparency in Corporate Formation, Shell Companies, Real Estate, and Financial Transactions, Congressional Research Service (8 July 2019), crsreports.congress.gov/product/pdf/R/R45798. In promulgating the customer due diligence rule, FinCEN noted that the beneficial ownership collection and verification requirements imposed on financial institutions at the account opening stage for legal entities were part of a strategy that included the collection of beneficial ownership information at the time of incorporation. See 81 FR 29398, 29401 („Broadening and strengthening fixed-term contracts is an important part of the Ministry of Finance`s broader three-pronged strategy to improve the financial transparency of legal entities. Other key elements of this strategy are: (i) collecting beneficial ownership information at the time of establishment of the legal entity and (ii) facilitating the global implementation of international standards on clients and beneficial ownership of legal entities). Requiring companies to provide beneficial ownership information to FinCEN and to provide law enforcement, financial institutions and other authorised users with prompt access to that information is intended to contribute to the fight against corruption, money laundering, terrorist financing, tax evasion and other illegal activities.
In particular, the proposed rule departs from FinCEN`s customer due diligence rule, both by adopting a broader definition of beneficial ownership, thereby significantly increasing the number of persons to be reported, and by expanding the types of entities exempted from their requirements. The broader definition of ownership and the mismatch in the scope of firms covered by the two rules suggest that possible revisions to FinCEN`s customer due diligence rule could be significant. (30) As mentioned in the CTA, in some cases several companies may overlap in complex ownership structures. Where financial institutions are not required to consider applicant information as part of due diligence with respect to a reporting entity opening an account, should the conditions for a financial institution`s access to applicant information be different from those for its access to beneficial ownership information? (6) The CTA contains numerous defined exceptions to the definition of „reporting company”. Are these exceptions sufficiently clear, or are there aspects of these definitions that FinCEN should clarify through regulation? (ii) Where there is the possibility of a cash refund for the account activity referred to in paragraphs (h)(1)(ii) to (iv) of this Section, the beneficial ownership of the Legal Entity of the Customer shall be identified and verified by the Financial Institution in accordance with this Section either at the time of the first transfer or at the time of such refund. (xiv) a foreign financial institution established in a country where the supervisory authority of that institution maintains information on the beneficial ownership of that institution; FINCEN`s Regulatory Support Section at 1-800-767-2825 or electronically under frc@fincen.gov. In addition, the CTA requires the Secretary to take certain steps in the development of these regulations. This includes a commitment to communicate with members of the small business community and other appropriate parties to ensure the efficiency and effectiveness of the process for businesses subject to CTA requirements. [51] In addition, when enacting the necessary regulations prescribing procedures and standards for reporting beneficial ownership information and FinCEN identifiers, the CTA requires FinCEN to the greatest extent possible: According to FinCEN legislation, the beneficial ownership rule states: „A bank shall establish and maintain written procedures that are appropriately designed to enable beneficial ownership of customers.
legal entities. identify, verify and include them. Procedures for its anti-money laundering compliance program. Translation: All relevant financial institutions must collect and verify the information of all significant owners of legal entities and their accounts. You must collect all this information when opening the new account.