WASHINGTON - Senate Judiciary Committee Chairman Chuck Grassley expressed support for a proposal to clamp down on money laundering and tighten rules designed to prevent terrorists and other criminals from exploiting America's financial system. Currently, financial institutions are required to verify the identities of customers, but not necessarily the identities of the individuals who control or benefit from a legal entity, such as a corporation, association or partnership.
"White Collar criminals, drug traffickers, and even terrorists can, at this very moment, exploit our financial system and shield their illicit activities behind these anonymous legal entity customers. This [Notice of Proposed Rule Making] would close the loopholes and require banks to identify the natural person who is the beneficial owner of such an entity," Grassley said in a letter to the Financial Crime Enforcement Network.
The rule, proposed by the Financial Crimes Enforcement Network, clarifies and strengthens provisions under the Bank Secrecy Act's customer due diligence requirement by explicitly calling for financial institutions to identify and verify the beneficial owners of legal entity customers. The proposal also includes new requirements regarding the nature and purpose of customer relationships as well as ongoing monitoring of any suspicious transactions.
Grassley has long worked with colleagues in a bipartisan manner to increase transparency of corporate beneficiaries and strengthen laws designed to prevent money laundering and combat terrorist financing. A signed copy of Grassley's letter can be found here. Full text of the letter is available below.
June 8, 2015
VIA ELECTRONIC TRANSMISSION
Ms. Jennifer Shasky Calvery
Director
Financial Crimes Enforcement Network
U.S. Department of the Treasury
P.O. Box 39
Vienna, VA 22183
RE: Docket No. FINCEN-2014-001; (RIN) 1506-AB25
Customer Due Diligence Requirements for Financial Institutions
Dear Director Shasky Calvery:
I write to express my support for FinCen's efforts to address gaps in the customer due diligence (CDD) requirement for financial institutions through the above referenced Notice of Proposed Rulemaking (NPRM). I agree that banks should be required under the Bank Secrecy Act (BSA) to identify the beneficial owners of legal entity customers (i.e., corporations, partnerships, and limited liability companies) and this proposed rule would go a long way towards enhancing financial transparency and safeguarding our financial system against illicit use.
Current BSA regulations are helpful to enforcement efforts. They ensure that banks know their customers and mandate the reporting of suspicious activity to law enforcement. But certain gaps exist in the current regulatory framework. In particular, it is unclear to me how banks and other financial institutions can ever truly "know" a legal entity customer if they cannot identify the natural person who ultimately controls it (or otherwise benefits from it). White collar criminals, drug traffickers, and even terrorists can at this very moment exploit our financial system and shield their illicit activities behind these anonymous legal entity customers. This NPRM would close the loophole and require banks to identify the natural person who is the beneficial owner of such an entity.
As you may be aware, I have been working with my Senate colleagues for a number of years - on both sides of the aisle - to develop legislation that would strengthen our anti-money laundering laws, combat terrorist financing, and mandate the disclosure of corporate beneficiary information to increase transparency and help our law enforcement and regulatory agencies protect our financial system. But until these efforts bear fruit, FinCen's NPRM offers one of the most realistic and effective means of advancing these goals.
I would like to thank you for your efforts to ensure the integrity of our financial system. Please direct any inquiries on this issue to Jeffrey Snyder of my committee staff at (202) 224-5225.
Sincerely,
