LAW ENFORCEMENT and OTHERS DISSAPOINTED with ULTIMATE BENEFICIAL OWNERSHIP DRAFT LEGISLATION

LAW ENFORCEMENT and OTHERS DISSAPOINTED with ULTIMATE BENEFICIAL OWNERSHIP DRAFT LEGISLATION was published by JD Supra on 7/31/18.

There is a Bill (H.R. 6068), originally drafted on November 14, 2017, called the Counter Terrorism and Illicit Finance Act (CTIFA).  The Bill intended to propose a substantial overhaul to the Bank Secrecy Act (BSA).   

When the CTIFA was originally introduced in November 2017, it proposed a notable change to the BSA; transparent incorporation practices and the creation of a National Directory of Beneficial Owners (BO) of Legal Entities: Corporations and LLCs.  This would be an Amendment to the BSA —Chapter 53 of Title 31 of the US Code, creating a FinCEN (Financial Crimes Enforcement Network) Beneficial Ownership Information Database.  

The proposed new transparent incorporation practices and Beneficial Ownership Reporting Requirements introduced in the original Bill were completely eliminated on June 12, 2018.

Law enforcement and Law makers were “happy” about the Bill because they thought that:

The US Government WAS determined to enforce financial transparency and combat the misuse of companies engaging in illicit activities; and that a transparency push would assist the international financial industry/government partnerships with identifying BOs during key events such as:

1. Entity account openings at Financial Institutions.
2. Entity formation.
3. Transfers of entity ownership.
4. Misusing the multi-faceted U.S. entity system for banking and tax haven purposes and other illicit activities by a foreign entity.  
5. Disguising the source of funds being deposited by a foreign entity into the U.S. banking system.

Removing the BO provision from the Bill will support a perception that the US is a tax haven

The US is known as a tax haven because it LACKS:

• Participation in the Common Reporting Standard (CRS)
• Reciprocity under FATCA Intergovernmental Agreements (IGA) with other countries
• Laws requiring the beneficial ownership of US corporations be revealed
• Comprehensive Anti-Money Laundering (AML) measures in the non-financial sector: lawyers, accountants, real estate agents, trust and company service providers

The sentiment from Lawmakers and Law Enforcement in the US was that the addition of the BO provision in the CTIFA would help combat the problem of lack of financial transparency due to the use of anonymous shell companies that are viewed as conduits for money laundering. 

Fraternal Order of Police (FOP)

The FOP is the world’s largest organization of sworn law enforcement officers with more than 335,000 members.  On June 13, 2018, the day after the BO provision was removed from the CTIFA, they sent a letter to the Chairman and Ranking Member of the Committee on Financial Services.

The FOP stated in their letter signed by its National President – Chuck Canterbury:

“Simply put, this bill does nothing to counter terrorism or illicit finance because the law enforcement component – the collection of beneficial ownership information – has been removed.  This means there is no reason for the FOP — or any law enforcement organization for that matter —- to support the current draft of this now ill-named bill”.

Can the US make gains in the AML battle, without the support and endorsement of Law Enforcement? 

https://www.jdsupra.com/legalnews/law-enforcement-and-others-dissapointed-87996/