The U.S. Treasury has issued a new report which says that a lack of requirements to disclose a company’s beneficial ownership information is one of the most critical vulnerabilities in the U.S. financial system, the U.S. Treasury Department said in a new report. The Treasury’s Financial Crimes Enforcement Network, or FinCEN, in 2018 issued a rule that requires financial institutions regulated by the agency to identify and verify the beneficial owners of legal entity customers when they open accounts and at defined points thereafter. The initial examinations of compliance with this requirement haven’t shown significant deficiencies with the implementation, the Treasury said in the report. However, the U.S. Treasury doesn’t, have the authority to require the disclosure and that addressing this gap needs legislative action.
Published by the Treasury’s Office of Terrorist Financing and Financial Crimes, the report identified several emerging threats and systemic vulnerabilities in the U.S. financial system that are being exploited by illicit actors and laid out some ongoing efforts to address these issues. A spike in the misuse of digital assets-cryptocurrency and the failure of foreign nations to supervise digital assets activity, for instance, is another vulnerability, according to the report.
Currently, there is no categorical obligation at the state or federal level requiring companies to disclose information on beneficial ownership at the time of their formation. The Treasury said criminals have continued to misuse legal entities to conceal assets and activities. Certain limited-liability companies, referred to as shell companies, are registered in the U.S. under the names of representatives who neither own nor operate them.
Another weakness is the lack of comprehensive anti-money-laundering requirements of financial institutions .. These include, for example, non-federally insured credit unions and certain trust companies that aren’t subject to federal oversight and are exempt from the anti-money-laundering obligations, as well as professionals such as lawyers, according to the report.
Jeffrey A. Newman represents whistleblowers nationwide including Securities & Exchange whistleblowers who reveal information about major corporate financial fraud, especially in publicly traded companies. He can be reached at Jeff@JeffNewmanLaw.com or by calling 617-823-3217.