On May 6, 2016, the US Treasury Department put forth several measures to combat money laundering, corruption and tax evasion, in the wake of the so-called “Panama Papers” document leak. First, the US Treasury issued a final Customer Due Diligence Rule that for the first time requires all financial institutions to collect and verify the personal information of the individuals who own, control and profit from companies (i.e., the beneficial owners)when those companies open accounts. Specifically, the final rule requires all financial institutions to identify and verify the identity of the beneficial owners of companies opening accounts by obtaining the information on a standard certification form or by other means. The final rule also amends the anti-money laundering program requirements to include risk-based procedures for conducting ongoing customer due diligence to enable financial institutions to (1) understand the nature and purpose of customer relationships; and (2) conduct ongoing monitoring to identify and report suspicious transactions and maintain updated customer information. The final rule will be effective July 11, 2016, with a compliance date of May 11, 2018.
Treasury also announced that it would be sending new proposed beneficial ownership legislation to Congress that would require companies to know and report adequate and accurate beneficial ownership information at the time of a company’s creation, so that the information can be made available to law enforcement agencies. Companies formed within the United States would be required to file beneficial ownership information with Treasury, and face penalties for non-compliance. In a letter to House Speaker Paul Ryan, Treasury Secretary Lew encouraged Congress to approve pending tax treaties and enact legislation that would require the United States to provide its international partners with the same information about US financial institutions as they are required to provide to the US Internal Revenue Service under the Foreign Account Tax Compliance Act. Finally, Treasury also announced proposed regulations related to foreign-owned disregarded entities, including foreign-owned single-member limited liability companies, that would require such entities to obtain an employer identification number with the Internal Revenue Service.
The press release is available at: https://www.treasury.gov/press-center/press-releases/Pages/jl0451.aspx.
The customer due diligence rule is available at: https://www.gpo.gov/fdsys/pkg/FR-2016-05-11/pdf/2016-10567.pdf.
Secretary Lew’s letter to Speaker Ryan announcing its intention to propose beneficial ownership legislation is available at: https://www.treasury.gov/press-center/press-releases/Documents/Lew%20to%20Ryan%20on%20CDD.PDF.