US Treasury petitions for full disclosure of Beneficial Ownership data

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The Treasury in the US is petitioning for the introduction of federal legislation to regulate newly formed companies and other legal entities to provide full details of the Beneficial Owner to the IRS (Internal Revenue Service).
Details of the petition were revealed in a speech by Assistant Secretary to the Treasury Jennifer Fowler at a financial crime conference, unintentionally on the same day the “Panama Papers” revelations were leaked to the media.

The US Treasury is currently in the process of introducing new regulations imposing financial institutions to perform CDD (Customer Due Diligence) checks on all potential and new clients. This rule is close to being finalised, after being under consultation since the first proposal in August 2014.

This petition is only starting to combat the misuse of shell companies overseas. There still remains a need for all companies disclose their beneficial owners to the government at the point of company formation. There remains a longstanding weakness in the system, as there is no state requirement to provide such information when a legal entity is created. In recognition to the Panama papers scandal, Ms Fowler stated: “The consequences of the misuse of legal entities to hide beneficial ownership has been highlighted in the news this week.”

This weakness in the current regime can be resolved with swift congressional action regarding company formation legislation. Any new legislation must include requirements for providing regular updating of adequate and accurate information, with penalties for non-compliance and as mentioned previously, full disclosure of Beneficial Ownership upon establishment.