Reported by: Spencer Woodman

The U.S. Treasury Department’s quest to build a company ownership database meant to battle dirty money has hit another setback, with a key national banking group calling for the agency to withdraw its “fatally flawed” plan.

In a letter submitted last week, the American Bankers Association said the Treasury’s latest proposed rule for the registry would so sharply restrict bankers’ access to company ownership data that it would be useless to the country’s sprawling financial sector.

The industry association‘s comments, co-signed by 51 state-level banking associations, are a stark reversal for a group that had previously been a key supporter of the law mandating the database’s creation. The group’s comments do not question the overall registry but rather focus on the Treasury’s plan for implementing it.

Experts say the creation of a registry of company owners is crucial for unmasking the people behind anonymous shell companies that criminals and terrorists use to hide and transfer illicit cash. Advocates have consistently flagged the U.S. financial system as notoriously opaque and vulnerable to money laundering.

Citing public outcry following the FinCEN Files’ release, U.S. lawmakers advanced a landmark anti-money-laundering bill called the Anti-Money Laundering Act of 2020, which included the Corporate Transparency Act. The law tasked the U.S. Treasury’s Financial Crimes Enforcement Network — FinCEN — with setting up the new database and writing the detailed regulations that would undergird the system.

The American Banking Association had originally hoped that a reliable ownership database would reduce burden on bank staff in performing due diligence to ensure clients are not moving dirty money through company accounts. But the Treasury Department’s latest proposal would require bankers to ask for a client’s consent to seek their information in the database. Once a client approves, the bank would also have to submit a request to be reviewed by Treasury Department officials each time they wanted to access ownership information. The banking association said the proposed set-up would be “so limited that it will effectively be useless.”

Ross Delston, a Washington, D.C.-based attorney and anti-money laundering specialist, told ICIJ that requiring bankers to attain customers’ consent before accessing ownership data is one of the most egregious flaws of the Treasury’s proposed management of the database.

Read full report: https://www.icij.org/investigations/fincen-files/proposed-rule-would-render-us-company-registry-effectively-useless-bankers-warn/