Tuesday, May 10, 2016

The U.S. Treasury Announces Key Regulations

The U.S Department of the Treasury announced several actions to strengthen financial transparency and combat the misuse of companies to engage in illicit activities. These actions target the key points of access when:
  • companies open accounts at financial institutions;
  • companies are formed, or ownership is transferred; and
  • foreign-owned U.S. companies seek to evade their taxes.
Most of these AML/CFT measures have already been implemented and practised in other jurisdictions, including Singapore.

CDD Final Rule

Financial institutions under this rule will include, banks, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities. The Final Rule incorporates new requirements such as,
  • identifying and verifying the identity of the beneficial owners of companies opening accounts;
  • understanding the nature and purpose of customer relationships to develop customer risk profiles; and
  • conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.

In addition, financial institutions will have to identify and verify the identity of any individual who owns 25 percent or more of a legal entity and an individual who controls the legal entity. The final rule extends the proposed implementation period from one year to two years.

Beneficial Ownership Legislation

The legislation would require companies to present accurate beneficial ownership information and make available the information to law enforcement. Companies formed within the United States would be required to file beneficial ownership information with the Treasury Department.

The proposed legislation also contains amendments to the current Geographic Targeting Order (GTO) authority which would clarify FinCEN’s ability to collect information under GTOs. The most recent GTOs temporarily require certain U.S. title insurance companies to record and report the beneficial ownership information of legal entities making “all-cash” purchases of high-value residential real estate.

Foreign-Owned Single-Member LLC Proposed Regulations

Treasury also announced proposed regulations to require foreign-owned “disregarded entities,” including foreign-owned single-member limited liability companies (LLCs), to obtain an employer identification number (EIN) with the IRS.

Click here for more information with regards to the regulations.

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