Panama Papers: US to Force Banks to Identify Shell Company Owners

Published: 08 April 2016


By Stella Roque

The US Treasury Department said Wednesday that a new rule is expected soon compelling US banks to identify the owners of shell companies, Reuters reported.

US President Barack Obama also called for international tax reform, the Guardian said, as revelations from the Panama Papers brought to light the hidden assets of political leaders and their families, business tycoons and sanctioned criminals from across the globe.

The proposed new customer due diligence rule will require banks to identify any individuals who own at least 25 percent of companies that open bank accounts, the New York Times said, as well as any individuals exercising control over those companies.

The rule is expected to require banks and brokerage firms to request information from the customers themselves, but not to verify that information through investigation, Reuters said.

Rob Rowe, a lawyer with the American Bankers Association, told Reuters there is currently no procedure for banks to verify beneficial ownership (the true owners) or update ownership information except by asking the companies themselves.    

The US is seen as lagging behind in the global push for greater corporate transparency, the New York Times said. The US still allows states to register corporate entities and other structures without registering the names of the actual people behind them. This makes it harder for banks to do independent due diligence checks, according to David Schwartz, who heads the Florida International Bankers Association.

The US Treasury Financial Crimes Enforcement Network proposed a rule on beneficial ownership in 2014, but disagreements between the financial regulators vetting the rule and a mandatory cost analysis to the industry slowed the process, said Reuters.

Under current US law, banks must apply “know your customer” rules to meet financial sanctions and anti-money laundering regulations, but are not required to identify customers behind shell companies, according to the New York Times.

The New York Times indicated the final step in approval of the new rule is expected to start shortly and usually does not last longer than three months.

The Panama Papers have had wide ranging impact around the world since their publication started on Sunday, including the resignation of Icelandic Prime Minister Sigmundur David Gunnlaugsson in response to political pressure, reported CNN.