On May 5, 2016, the US Department of the Treasury announced several actions to crack down on illicit financial conduct and increase transparency in the financial system. First, Treasury will publish a Customer Due Diligence (“CDD”) Final Rule. This rule will harmonize and clarify existing anti-money laundering due diligence requirements and also add a new requirement: financial institutions, when opening an account for a company, must collect and verify the personal information of beneficial owners, i.e., the individuals who own, control, and profit from the company. Second, Treasury will send Congress legislation that would require companies formed in the United States to have adequate knowledge of, and file a report to the Treasury Department concerning, accurate beneficial ownership information at the time of a company’s creation. Third, Treasury will propose a new regulation that would require “disregarded entities” – such as foreign-owned single-member LLCs – to obtain employer identification numbers from the Internal Revenue Service so that it can determine whether such entities have tax liability or other obligations.
In an accompanying letter to Congress, Treasury Secretary Jack Lew stated, “The Treasury Department has long focused on countering money laundering and corruption, cracking down on tax evasion, and hindering those looking to circumvent our sanctions. Building on years of important work with stakeholders, the actions we are finalizing today mark a significant step forward to increase transparency and to prevent abusive conduct within the financial system.” Please stay tuned for additional insights and analysis from Steptoe.