Senators seek to reassure small businesses about AML bill

Register now

Members of the Senate Banking Committee sought to allay the concerns of small businesses at a hearing Thursday on a bill to require firms to identify their true owners when incorporating by providing four basic pieces of information.

Under current rules, banks must collect such information when a business owner applies for an account. The legislation would mandate that companies take on that responsibility — filing to the Treasury Department's Financial Crimes Enforcement Network — when they incorporate.

While the bill has bipartisan support, some small businesses are objecting, arguing it would place too much burden on them.

“Our members don’t know who Fincen is,” said Karen Harned, executive director of the Small Business Legal Center at the National Federation of Independent Business. “It is unrealistic to assume that small business owners will simply submit personal information including a passport or driver’s license and date of birth to a government agency that none of them have ever heard about.”

Harned rankled some senators by claiming that a small-business owner who failed to file “would be exposed to civil penalties of $10,000 and criminal penalties of up to three years in prison.”

The legislation has no penalties for mistakes, said Greg Baer, CEO of the Bank Policy Institute, a public policy research and bank advocacy group.

Sen. Mark Warner, D-VA, urged small businesses to take part in “patriotic reporting.”

“Some of the over-the-top rhetoric about, well, ‘You’re going to get put in jail,’ is either an evidence of ignorance or is really not very helpful,” Warner said. “We are very concerned about undue burden on small businesses. To have simply a knee-jerk reaction of any new reporting requirement … is not a very sophisticated or helpful view.”

Others said complaints about paperwork requirements were an affront to law enforcement and dozens of attorneys general that need the basic information on shell companies to combat money laundering, narcotics trafficking and Medicare fraud, among other crimes.

“We’re talking about information that could save lives,” said Sen. Doug Jones, D-Ala. "Just because some businesses might be skeptical, is that any reason not to do it? It doesn’t increase the burden very much.”

Treasury’s 2018 money-laundering report has estimated that much of the $300 billion in illicit proceeds are funneled through shell corporations.

Gary Kalman, executive director of the Financial Accountability and Corporate Transparency Coalition, provided examples of how shell corporations have been used by Iran to purchase Manhattan real estate and by the Taliban, which created a shell company that had a contract with the Defense Department.

“It not only undermines our ability to find this information but inhibits our ability to work with other nations,” Kalman said.

Britain has a similar directory for tracking owners of shell companies; the European Union has voted that all 28 member states have a directory in three years, Kalman said.

Several senators said the U.S. was the second-biggest contributor to financial secrecy, according to an index by the Tax Justice Network. Switzerland was the biggest.

For reprint and licensing requests for this article, click here.
AML Commercial lending Commercial real estate lending Money laundering Regulatory relief FinCEN
MORE FROM AMERICAN BANKER