WASHINGTON — Big banks have added their support to a bipartisan House bill that would require corporations and limited liability companies to provide beneficial ownership information to the states in which they are formed.

The legislation would give financial institutions access to that data, essentially helping them with due diligence and identifying corporate beneficial owners of business customers, as required by anti-money-laundering regulations.

Rep. Carolyn Maloney,, D-N.Y., a co-sponsor of the bill, said the change just makes sense.

“We basically have been requiring banks to a do a lot of work for the government to know all their customers,” she said during a press conference Wednesday.

Rep. Carolyn Maloney, D-N.Y.
"It will move in this Congress," said Rep. Carolyn Maloney, D-N.Y., of a bill to help the government identify beneficial owners of corporations. Bloomberg News

The measure is backed by The Clearing House Association, which represents the 25 largest commercial banks. It sees the bill as a way to alleviate undue burden on the industry and align itself with what federal authorities are seeking.

“For U.S. banks, the interest here actually parallels that of law enforcement,” said Greg Baer, president of the trade group and a former Treasury official in the Clinton administration.

Talking to reporters after the press conference, Baer said the financial benefit for banks is twofold.

“It is something of a cost savings and also a risk savings, because you can rely on the database to say, ‘Yes, this is who owns the company,' " Baer said.

When taking on a new corporate client, banks are required to identify the actual owner of the firm. Because of U.S. laws surrounding company formation, it can be easy for bad actors to hide illicit funds through real estate deals and other means. A recent Global Witness report that was featured on CBS’s "60 Minutes" also found that lawyers are often very willing to help a customer hide illegal funds.

The challenge for banks is they can still be liable for moving illicit money through the payment system even if it is being hidden behind a shell corporation.

“For U.S. banks, that is a game of hide and go seek where they have to investigate their customers to find out who owns them,” Baer said.

The Maloney bill, Baer said, would “allow U.S. banks to have access to the same database that law enforcement does when they are trying to determine the ownership of the companies they are banking.”

The bill has fallen short in the past, but Maloney is hoping the fifth time is the charm.

"It will have strong bipartisan support,” she said. “I think it will move in this Congress.”

While the House may start discussions on a larger package to address bank anti-money laundering requirements, Maloney said those talks haven’t begun yet and she hoped to move her measure "on its own."

Rep. Peter King, R-N.Y., is the lead co-sponsor, with Maloney and Reps. Gwen Moore, D-Wis., and Ed Royce, D-Calif., also co-sponsoring the bill. Royce is the chairman of the House Committee on Foreign Affairs.

A companion bill sponsored by Senate Judiciary Committee Chairman Sen. Chuck Grassley, R-Iowa, and Sen. Sheldon Whitehouse, D-R.I., is expected to be reintroduced in the Senate.

Maloney pointed to the increased attention that terrorist financing and money laundering is getting in Congress, including the formation of a new House Financial Services Committee subcommittee tackling the issue.

“A big change” from past efforts is that Financial Services Committee Chairman Jeb Hensarling, R-Tex., “created an antiterrorism subcommittee; that is a big step,” she told American Banker in an interview on the sidelines of the press conference. “When I first came to Congress, I never thought we would have an antiterrorism subcommittee, but that is the world we live in.”

Maloney said she is also having discussions with Rep. Stevan Pearce, R-Nev., chairman of the House Subcommittee on Terrorism and Illicit Finance, about holding a hearing on the bill. She added that Treasury Secretary Steven Mnuchin indicated during his confirmation hearing that he supports the proposal.

“There is not a doubt in my mind" that Mnuchin supports it, Maloney said in the interview.

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