Matthew Ledvina Looks at How the United States Treasury Addresses Money Laundering Concerns with an Evolving Approach
Many areas of the United States are known for being secrecy jurisdictions for ownership of a company. With more than 50 company jurisdictions, owners of companies are able to shop around for the jurisdiction that has the lowest disclosure requirements, with many states having tax laws that are lax at best when it comes to identification and disclosure of the economic owners of a company to the Secretary of the State.
Secrecy Jurisdictions
Some of the ‘best’ secrecy jurisdictions at present include Wyoming, Delaware, New Mexico and Nevada, where true ownership of a company can be kept hidden from the authorities. The number of legal disparities makes it virtually impossible for any jurisdiction, organisation or law enforcement agency to make the changes required to challenge this secrecy, except for the federal government. The United Stares’ Treasury has therefore announced that the Financial Crimes Enforcement Network (FinCEN) will be adopting a new and stricter approach to regulations, with the aim of addressing threats including terrorist financing and money laundering across all jurisdictions.
Venezuela Crisis
The need for more stringent and enforceable money laundering legislation has been strengthened by the recent crisis in Venezuela. Venezuelan nationals have been pursued by the US Department of Justice for several years regarding money laundering activity.
Two former Venezuelan officials were indicted in Florida in late June 2019, on one count of money laundering conspiracy and seven counts of money laundering. In August 2018, eight individuals were indicted for participation in a money laundering scheme bringing dirty money to the US and several other countries from Venezuela.
PDVSA, the state oil company of Venezuela, has been found to be at the heart of the scheme, in which several prominent individuals from Venezuela have been identified as being involved. FinCEN is currently working as part of a cross-country working group that also includes representatives of Argentina, Columbia, Mexico and Panama in response to this crisis.
Suspicious Activity Reports
In a speech made at the NYU Law Program on Corporate Compliance and Enforcement in June 2019, the director of FinCEN Kenneth Blanco discussed the current approach of the organisation towards dealing with money laundering issues.
Blanco explained that FinCEN processes numerous Suspicious Activity Reports, known as SARS, each day, through an automated system that identifies which SARs require further analysis. The findings deemed as the highest priority, gleaned from around 50 matches per day, are gathered into flash reports to be distributed to regulatory and law enforcement partners of the agency.
Customer Due Diligence Rule
Under the Customer Due Diligence Rule, financial institutions are required to gather information on beneficial ownership of any legal entity at the point said entity opens an account with the institution. Blanco emphasised that this is just the first stage in a process that needs to lead to full disclosure of beneficial ownership at the stage a corporation is formed.
Currently, the volume of resources required to identify owners of shell companies is exhausting, with law enforcement agencies often having to pursue information from several sources. These include human sources, surveillance operations, search warrants, witness statements, grand jury subpoenas and foreign legal assistance requests. FinCEN is collaborating with Congress to address these issues.
FinCEN is also working to evolve its approach across several other areas of concern, including strengthening the anti-money laundering and counter-terrorism financing system, collaborating with the Federal Bureau of Investigation over business email compromise fraud schemes, and the continued issuance of Geographic Targeting Orders.
About Matthew Ledvina
Matthew Ledvina works as a cross-border tax adviser, with US taxation among his specialities. He has worked with many high-profile clients and high-net-worth individuals. Follow Matthew Ledvina on YouTube and Instagram for future updates.