Magazine article American Banker

Big Banks on Board with House Beneficial Ownership Bill

Magazine article American Banker

Big Banks on Board with House Beneficial Ownership Bill

Article excerpt

Byline: Ian McKendry

WASHINGTON -- Big banks have added their support to a bipartisan House bill that would require corporations and limited liability companies to provide beneficial ownership information to the states in which they are formed.

The legislation would give financial institutions access to that data, essentially helping them with due diligence and identifying corporate beneficial owners of business customers, as required by anti-money-laundering regulations.

Rep. Carolyn Maloney,, D-N.Y., a co-sponsor of the bill, said the change just makes sense.

"We basically have been requiring banks to a do a lot of work for the government to know all their customers," she said during a press conference Wednesday.

The measure is backed by The Clearing House Association, which represents the 25 largest commercial banks. It sees the bill as a way to alleviate undue burden on the industry and align itself with what federal authorities are seeking.

"For U.S. banks, the interest here actually parallels that of law enforcement," said Greg Baer, president of the trade group and a former Treasury official in the Clinton administration.

Talking to reporters after the press conference, Baer said the financial benefit for banks is twofold.

"It is something of a cost savings and also a risk savings, because you can rely on the database to say, 'Yes, this is who owns the company,' " Baer said.

When taking on a new corporate client, banks are required to identify the actual owner of the firm. Because of U.S. laws surrounding company formation, it can be easy for bad actors to hide illicit funds through real estate deals and other means. A recent Global Witness report that was featured on CBS's "60 Minutes" also found that lawyers are often very willing to help a customer hide illegal funds.

The challenge for banks is they can still be liable for moving illicit money through the payment system even if it is being hidden behind a shell corporation.

"For U.S. banks, that is a game of hide and go seek where they have to investigate their customers to find out who owns them," Baer said. …

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