May 5, 2016
The Obama administration adopted a rule on Thursday that would require financial institutions to identify the true owners of companies they do business with, after leaks from a Panama law firm threw a spotlight on money hidden offshore.
The Treasury and Justice departments also proposed related legislation that they said would help law-enforcement authorities pursue money laundering and corruption cases as well as close loopholes that could allow some foreign citizens to evade U.S. taxes.
“Gaps remain in our laws that allow bad actors to deliberately use U.S. companies to hide money laundering, tax evasion and other illicit financial activities,” Treasury Secretary Jacob Lew said in a letter to House Speaker Paul Ryan (R., Wis.) outlining the proposals.
The rule, which now goes into effect, is designed to prevent criminals’ or terrorists’ use of anonymous firms to move money undetected, and requires financial institutions to know and keep records of who owns the companies that use their services. Specifically, banks, brokers and others will have to verify the identities of any people who own 25% or more of a company for which it provides an account, and any person who controls the company.