Are you ready for new teeth in U.S. rules for UBOs?


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The Chief Compliance Officer of Ocean Bank, Lee Yanero, has a clear philosophy about due diligence related to UBOs: She wants her staff to identify “a warm body.” She is right on.

Ms. Yanero described her approach at a Compliance seminar in Miami earlier this year, and now global furor over disclosures in the Panama Papers has governments scrambling to explain their own huge gaps in their AML laws—namely regarding identifying Ultimate Beneficial Owners of companies. But a new U.S. rule has been in the works, and it’s now in final review.

The Office of Management and Budget, which operates on behalf of the U.S. president, has accepted for final review a proposed rule that would require banks to identify the “warm bodies”—the Ultimate Beneficial Owners for all accounts. As the Panama Papers have glaringly revealed, current U.S. and global standards for the identification of PEPs and UBOs have too many loopholes to prevent tax evasion, money laundering, and the stashing of illicit funds.

FinCEN initially proposed this rule in 2014 after years of discussion. While details of the rule currently under final review are not yet available, the Wall Street Journal reports that the initial proposal in 2014 required the financial institution to “require the person opening an account to fill out a form identifying themselves, the legal entity for which the person is opening the account and any beneficial owners associated with the legal entity…. The person opening the account would furnish on the form a beneficial owner’s name, address, date of birth and social security or passport number.”

This rule would require identifying actual verifiable human beings in control of companies rather than continuing to allow UBOs to remain hidden in murky corporate structures. In addition to the FinCEN rule, Josh Drobnyk of the U.S. Treasury said his agency is working with the U.S. Congress to pass legislation further deepening requirements for the identity of Ultimate Beneficial Owners.

Drobnyk writes in his Treasury blog that the combination of a Treasury rule and federal legislation together “target two different points of access to the international financial system—when accounts are opened in financial institutions, and when companies are formed or when company ownership is transferred.” This would put the onus on full disclosure by the individuals creating and transferring companies, and financial institutions would then have to assiduously collect and screen this information. Making corporate ownership fully transparent and available to financial institutions would greatly aid the work Compliance officers responsible for onboarding and continuing due diligence.

Drobnyk asserts that more than $300 billion in illicit profits are generated each year in the United States, and that finally addressing the UBO gap would be a major advance in the effort to combat money laundering, tax evasion, and terrorist financing.

AML Partners CEO Frank Cummings said this rule and complementary legislation is long overdue. “Finally and fully dealing with the identification of UBOs would be a major asset in the work of AML/CFT Compliance,” Cummings said. “And lifting the veil of secrecy on true corporate ownership is central to this—and to the ability of financial institutions to be accountable partners in the fight against financial crime and terror. Talk of these types of moves has been in play for a long time, but the disclosures in the Panama Papers have brought a new pressure to bear against the interests who prefer secrecy.”

Cummings said he and his software-development team have been anticipating this move, and they have already built this functionality into their SURETY line of AML/CFT software solutions.

“We like to think ahead, to provide for financial institutions the most agile and most Compliance-supportive tools possible. For example, we have incorporated a Principals Registry for UBOs and Related Parties. We know acutely the pressures our customers face in terms of resources and accountability. Effectiveness and efficiency are key, and that is especially true with the challenge of UBO requirements.”