The world of anti-money laundering beneficial ownership regulations has seen its ups and downs as of late. As of May 11 when the Financial Crime Enforcement Center (FinCEN) issued its “Customer Due Diligence Requirements for Financial Institutions Rule,” covered financial institutions must verify and identify each person with a 25%+ stake in a legal entity customer. While reasonable, that’s nonetheless a tall order that places a significant financial burden on banks.
There was a glimmer of hope to alleviate the strain thanks to a new bill in the House Financial Services Committee. Initial drafts would have required FinCEN to collect beneficial ownership information at the time of corporate formation and share it with financial institutions and law enforcement agencies. Creating such a central registry would have helped reduce compliance costs. Recent changes to the bill removes those key provisions, however, threatening the ability to help prevent money laundering and other types of crime such as drug and human trafficking overall.
This is a very unfortunate development. Not only has the bill now lost the support of both the banking community and law enforcement, overall reform is threatened and the ability to protect our financial system continues to be at stake. It’s not as if financial institutions didn’t already have enough on their plates as it relates to AML and KYC. Protecting the financial markets against the threat of money laundering, terrorist financing, securities fraud, market manipulation and more by complying with the rigorous rules of the Bank Secrecy Act is no small feat.
While necessary, the work involved is intense and includes not only having a thorough understanding of all the regulations in place, but also thoughtfully choosing the right anti-money laundering vendor as well as choosing the right anti-money laundering software. The possibility of a central registry for beneficial ownership would have eliminated at least some of the heavy-lifting for already overburdened banks. But based on the changes to this new bill, it looks like much needed relief is not going to come any time soon. Learn more about the impact of this regulatory change in a new piece by B2B payments and compliance specialist Joe Susienka.