FinCEN Seeks Shell-Company Transparency (CRS Report for Congress)
| Release Date |
June 7, 2016 |
| Report Number |
SHELLCO |
| Source Agency |
Congressional Research Service |
Summary:
In May 2016, Treasury’s Financial Crimes Enforcement Network (FinCEN) released final rules outlining anti-money
laundering due diligence requirements for certain financial institutions that include for the first time a mandate to
identify and verify beneficial owners of legal entity customers. At the same time, Secretary of the Treasury Jacob J.
Lew wrote to congressional leaders urging ratification of pending tax treaties and enactment of legislation to establish a
federal database reflecting the beneficial ownership of newly established companies in the United States. He also
advocated legislation to require U.S. financial institutions to provide foreign jurisdictions with information on accounts
held for foreign nationals similar to the information that financial institutions abroad must supply on accounts held for
U.S. persons under the Foreign Account Tax Compliance Act (FATCA). These actions, summarized in a Department of
the Treasury press release, aim to increase transparency to fill gaps in the U.S. anti-money laundering/anti-terrorist
financing arsenal. They come soon after the April 2016 leak of the “Panama Papers,” a database released by the
International Consortium of Investigative Journalists, exposing documents used by a Panama law firm to set up shell
companies for thousands of clients around the world. These revelations have drawn attention to the ability of criminals
and terrorists to hide behind shell companies (both off-shore and domestically) to hide the proceeds of illegal activity
(i.e., money laundering) or to shelter funds illegally from home country taxes.
