On May 5, 2016, the U.S. Department of the Treasury announced several actions to strengthen financial transparency. Treasury announced a Customer Due Diligence (CDD) Final Rule, proposed Beneficial Ownership legislation and proposed regulations related to foreign-owned, single-member limited liability companies (LLCs).

CDD Final Rule

The CDD Final Rule adds a new requirement that financial institutions – including banks, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities – collect and verify the personal information of the beneficial owners who own, control, and profit from companies when those companies open accounts. The Final Rule also amends existing Bank Secrecy Act (BSA) regulations to clarify and strengthen obligations of these entities.

Specifically, the rule contains three core requirements: (1) identifying and verifying the identity of the beneficial owners of companies opening accounts; (2) understanding the nature and purpose of customer relationships to develop customer risk profiles; and (3) conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information. With respect to the new requirement to obtain beneficial ownership information, financial institutions will have to identify and verify the identity of any individual who owns 25 percent or more of a legal entity, and an individual who controls the legal entity. The final rule extends the proposed implementation period from one year to two years, expands the list of exemptions and makes use of a standardized beneficial ownership form optional as long as a financial institution collects the required information.

Beneficial Ownership Legislation

Treasury announced it is sending beneficial ownership legislation to Congress. As part of the legislation, companies formed within the United States would be required to file beneficial ownership information with the Treasury Department, and face penalties for failure to comply.

Foreign-Owned Single-Member LLC Proposed Regulations

Treasury also announced proposed regulations to require foreign-owned “disregarded entities,” including foreign-owned single-member limited liability companies (LLCs), to obtain an employer identification number (EIN) with the IRS.