One such agency mandated to combat money laundering, terrorist financing, and other financial crimes at home and abroad is the Financial Crimes Enforcement Network (FinCEN) which is set to receive US$229 million from the proposed $6.8 trillion budget.
Illicit proceeds equal an estimated two percent of U.S. gross domestic product, according to findings in the Treasury’s 2022 Strategic Action Plan. If approved by Congress, the budget will raise the bureau’s funding by approximately 20 percent from the previous fiscal year.
“FinCEN is up against a flood of dirty money finding its way into the U.S.,” said Erica Hanichak, Government Affairs Director of the FACT Coalition. “New resources for FinCEN would ensure the bureau has what it needs in terms of staff, licenses, and technology to keep our financial system safe.”
To help stem the tide of malicious financial activity, the new budget also makes room for the Beneficial Ownership Secure System in order to close “loopholes that allow illicit actors to evade scrutiny, mask their dealings, and undermine corporate accountability.”
There are many avenues through which to launder one’s money in and out of the U.S.—such as real estate transactions, private equity investments, art dealers—that do not receive the same degree of scrutiny as the banking industry does from U.S. financial authorities.
In a nutshell, the Beneficial Ownership Secure System is designed to collect data on any individuals who may seek to circumvent existing financial laws to evade taxes, hide their illicit wealth, and defraud American taxpayers.
To better track potential enablers of financial crime, a Beneficial Ownership Information (BOI) report will require new companies to identify to FinCEN both their beneficial owners and any of its company applicants.
A beneficial owner is categorized as any individual who either “exercises substantial control over a reporting company” or “ owns or controls at least 25 percent of the ownership interests” of said company, according to FinCEN.
Company applicants, meanwhile, are interpreted as the individual who directly files the document that creates the entity or the individual directs another to do so on their behalf.
Existing corporations and limited liability companies, meanwhile, must file this information with FinCEN within two years’ time, as set forth in the Corporate Transparency Act.
Although both sides of the aisle in Congress are in favor of clamping down on financial crime, they differ on the amount of funding that should be dedicated to the federal agencies mandated to do so.
The best way for the U.S. government to tackle dirty money, Hanichak said, is to fund those in the Treasury best suited to rooting it out.
“The big question now,” she added, “is whether Congress will deliver.”
