Beneficial-ownership database faces new headwinds: AML Compliance access too difficult?
In an about-face, the American Bankers Association (ABA) now opposes the Treasury Department’s proposed corporate-ownership registry. The ABA’s main concern centers on access prohibitions and security processes that are too onerous to be useful to financial institutions tasked with identifying corporate-ownership individuals and entities.
The proposed registry, intended to support the work of Anti-Money Laundering Compliance (AML Compliance), provides a cornerstone feature of the Corporate Transparency Act (CTA). The U.S. Congress passed the act in 2021, and FinCEN wants to go live with the ownership registry by January 2024.
The ABA had been a major backer of the proposed registry as it would help contain costs related to AML Compliance. Financial institutions in the U.S. and globally bear major regulatory responsibility for keeping financial crime out of the global financial system. And accurately identifying corporate ownership structures and Ultimate Beneficial Owners remains central to AML Compliance.
U.S. lawmakers and regulators promoted the ownership database as a key tool to prevent the use of anonymous shell companies to commit financial crime. But the ABA asserts that bowing to business interests has made registry nearly unusable by financial institutions.
ABA says onerous access won’t support AML Compliance efforts
In its letter to FinCEN the ABA and its state associations make the following statement: “The banking industry has long supported the establishment of the Registry and remains committed to engaging with FinCEN to support and promote the goals of the CTA, namely, combating illicit finance through the establishment of the Registry, while simultaneously reducing the regulatory burden on both small businesses and regulated entities. However, we believe that the proposal is fatally flawed, and it will not accomplish either of these objectives.”
The ABA asserts in its letter that the registry will be “of limited, if any, value to banks” because of the difficulty of accessing ownership information central to regulatory requirements. The ABA calls on FinCEN to pull the current proposal and re-engage both financial institutions and business interests to find a better option.
Specific recommendations from the ABA include the following (verbatim):
- Allow banks to use Beneficial Ownership Information (BOI) more broadly to discharge their responsibilities under the Bank Secrecy Act;
- Allow banks to share Beneficial Ownership Information with bank personnel across their enterprises, including in foreign jurisdictions;
- Clarify that banks are not required to access the Registry;
- Consider modern technological solutions that would provide a secure and efficient means of accessing the Registry;
- Include a safe harbor from liability for financial institutions that use Beneficial Ownership Information obtained from the Registry; and
- Amend the CDD Rule to clarify that banks are not required to collect and maintain Beneficial Ownership Information in all cases.
To read the full text of the letter, including ABA analysis, click here.
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