Bill to ease AML requirements stalls over shell-company rules

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WASHINGTON — The House Financial Services Committee tabled a vote Thursday on a bill easing anti-money-laundering requirements when lawmakers balked over the exclusion of new shell-company restrictions.

The bill, authored by Reps. Blaine Luetkemeyer, R-Mo., and Steve Pearce, R-N.M., would raise the dollar thresholds on transactions requiring banks to file currency transaction and suspicious activity reports.

But the legislation unveiled this week left out a requirement — included in an earlier bipartisan discussion draft — for new companies to provide the Financial Crimes Enforcement Network with "beneficial-owner" information when they are incorporated. That exclusion led some members to pull their support.

Beneficial-owner rules are designed to reveal the true individuals behind a corporation, preventing criminals from hiding behind shell companies. A Fincen "know your customer" rule that went into effect last month requires banks to collect beneficial-owner information from new account holders.

"I urge my colleagues on the other side of the aisle to strengthen the bill and make sure that it addresses the issue of beneficial ownership and the problem of anonymous shell companies," said Rep. Maxine Waters, D-Calif., the committee's ranking member, in a statement prepared for the committee markup where lawmakers were scheduled to vote on other bills as well.

"Currently, it can be very difficult to identify who the beneficial owner of a company is, which allows bad actors to circumvent U.S. laws to launder and hide money, or to exert influence," Waters said.

Banking groups support the bill both with the beneficial-owner provision and without it, but financial institutions prefer that business customers report that information directly to Fincen.

A June 14 letter from numerous financial trade groups backed the Luetkemeyer-Pearce bill, but said, "Before final passage, we encourage the committee to include language that would help prevent the use of shell companies to launder money by cloaking the identities of their beneficial owners from law enforcement."

In an op-ed for American Banker's BankThink blog, Gary Kalman of the Financial Accountability and Corporate Transparency Coalition said dropping that provision meant the bill "lost the support of law enforcement, including the Fraternal Order of Police."

"As a result, the bill has lost its bipartisan appeal," Kalman wrote. "A bill that could have been signed into law this year — one that provides law enforcement with powerful new tools and allows banks the flexibility to use better, more efficient ways to meet anti-money-laundering obligations — will not make it through the legislative process."

But other business groups argue that beneficial-owner rules would place undue burden on small businesses.

"Their overly broad and vague definitions, unworkable requirements, and severe penalties would do far more to impede law-abiding small and medium-sized business than to hamper the use of so-called shell companies to facilitate illicit activity," Brian O'Shea, senior director for the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, said at a congressional hearing in February.

Observers say lawmakers could still work out their differences over the bill and bring it back for a committee vote.

“We are hopeful that they will use this opportunity to reengage in bipartisan negotiations. We’re not done,” said Kalman in a brief interview.

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Money laundering Regulatory relief AML KYC Maxine Waters House Financial Services Committee FinCEN