WASHINGTON — The banking industry has influenced several key features in the final beneficial ownership rule, a top official at the Treasury Department's Financial Crimes Enforcement Network said this week, while defending the rule's effectiveness.
"Some may say that the final [beneficial ownership] rule and this new legislative proposal do not go far enough," Jamal El-Hindi, Fincen's deputy director, said at an Institute of International Bankers anti-money-laundering seminar in New York, according to prepared remarks. "Others may say that we are going too far in our push for transparency."
"[W]e simply cannot let the perfect be the enemy of the good. Particularly in this space where we know that nothing will ever be perfect," El-Hindi added.
The rule, which the White House announced earlier this month, will require banks to identify one or several individuals with a large stake or control of a company, before bringing them in as clients. But experts have said it is riddled with loopholes.
El-Hindi cited several changes the IIB successfully lobbied, noting that the organization's comments "were used to significantly shape the final rule."
The measures included a grandfathering clause for all companies that had already opened accounts with banks; a protraction of the grace period for implementing the rule from one to two years; and loosening requirements on which company affiliates banks had to identify as the so-called "beneficial owners."
El-Hindi promised that regulators would continue to work with the industry to help with their transition until they comply with the beneficial ownership rule.
"[W]e will reduce the concerns that some of you have expressed about your competitors asking fewer questions than your own institutions, or conducting weaker customer due diligence, and thereby potentially making themselves more attractive to persons seeking banking services while weakening everyone else's ability to identify bad actors," he said.
El-Hindi also urged the IIB and other industry representatives to "voice their support" for a piece of legislation Treasury has sent to Congress, which would require all newly formed companies in the U.S. to register the names of their owners with the government.
Speaking in New York, El-Hindi acknowledged the significant obstacles the bill will have to overcome.
"We have drafted the legislation, but a remaining challenge for us is to find support on the Hill, among the states, and within industry," he said. "None of the prior legislative efforts have gained sufficient traction."
El-Hindi also said industry cooperation had helped Fincen combat money laundering in several enforcement efforts, including the so-called "geographic targeting orders" issued earlier this year. The ordinances required U.S. title-insurance companies in Manhattan and Miami-Dade County, Fla., to identify individuals who used cash to buy expensive homes.
"We worked with industry upfront to understand the types of information we could get, which helped target our information collection to what would be most valuable, while imposing minimal burden," he said.
Fincen Director Jennifer Shasky Calvery is set to depart the agency at the end of the month for a position at HSBC, according to The Wall Street Journal.