| WASHINGTON, March 20
WASHINGTON, March 20 The U.S. Treasury
Department is trying to strike a balance between the need for
information from banks to help it nab hidden account owners and
administrative demands that a rule toward that end might create
for the banks.
Senior Treasury officials said the department will release
in coming weeks a proposal aimed at money laundering that would
force financial institutions to report the "beneficial," or
true, owners of certain accounts.
Banks have been anxiously awaiting the proposal's language,
fearing that a strict approach could mean they have to spend
huge amounts of time and money investigating the beneficial
owners of thousands of legal entities they do business with.
David Cohen, a top Treasury official, said in an interview
that he expects the rule to require different degrees of inquiry
in different circumstances.
"There is a recognition that the financial sector is
complex, and one-size-fits-all is not suitable here," said
Cohen, Treasury's undersecretary for terrorism and financial
intelligence, in an interview last week.
Cohen declined to discuss specifics of the rule, but he said
the extra information will help the U.S. government pursue money
launderers trying to hide their identities behind shell
companies and other legal entities, even if banks don't fully
check the accuracy of the information.
"One of the motivations is for law enforcement during the
course of their investigations to not hit that brick wall and be
able to get behind the account holder," Cohen said.
U.S. authorities have stepped up their enforcement of
anti-money laundering laws in an effort to clamp down on conduct
ranging from drug trafficking to terrorism, and have entered
into cease and desist orders with top banks including JPMorgan
and Citibank related to weak internal controls.
In December, HSBC agreed to pay a record $1.9
billion, in part to resolve charges that it failed to detect a
river of drug money flowing from Mexico into the United States.
Treasury said in February 2012 it planned to propose a rule
to force financial institutions to determine the true owners of
accounts held in the names of legal entities such as
corporations. It held five public hearings around the country
and received around 90 comment letters, but has not yet come out
with its proposal.
Some banks, broker-dealers and other firms already seek such
information about their riskiest accounts, but the rule was
envisioned as a way to provide a more uniform approach for the
industry and determine exactly when banks need to obtain such
Some firms expressed skepticism about how valuable that
information could be, since many states don't even collect
information about who a beneficial owner is when incorporating a
new company, making it difficult for banks to vet the details
without launching a full-scale investigation into each account.
"At this point, it is simply not feasible to impose
broad-based beneficial ownership requirements on U.S. financial
institutions in the absence of congressional legislation
requiring the collection and maintenance of publicly available
beneficial ownership information at the time legal entities are
created in the United States," the Financial Services Roundtable
said in its comments about the rule last year.
But just having the name of a beneficial owner, even if it
isn't verified, is still useful, officials said. If an account
signatory lies about who the owner is, it could be a
misrepresentation that authorities can act on.
"Make somebody say 'I'm the beneficial owner, I'm not the
beneficial owner.' Make that a real person," Chip Poncy, who
heads the Treasury office of strategic policy for terrorist
financing and financial crimes, said at an industry conference
in Florida last month.
Law enforcement officials "have insisted ... this is useful,
either for purposes of proving criminal intent or just as having
leverage in an investigation," he said.
Treasury officials have also expressed support for
legislation that would require the government to collect more
information about ownership when legal entities incorporate.
During a speech at a separate anti-money laundering
conference in Florida on Tuesday, Jennifer Shasky-Calvery, who
heads Treasury's anti-money laundering unit, the Financial
Crimes Enforcement Network, or FinCEN, said the government must
do more to make information about beneficial ownership
Cohen also said in the interview that enforcement bodies
have stepped up efforts to build cases against individuals, in
addition to institutions, for money laundering lapses.
U.S. authorities faced public backlash after the HSBC
settlement for failing to punish any bankers, either criminally
or civilly, and Cohen said FinCEN is looking more closely at
existing powers that could be used to hold individuals
"All of these entities act through people," Cohen said.
"That had not been a priority in FinCEN enforcement actions in