Anti money laundering compliance and the new standards on beneficial ownership

Abstract

This paper discusses the new Financial Crimes Enforcement Network (FinCEN) rule on beneficial ownership and the general due diligence challenges currently facing financial institutions. Covered financial institutions must comply with these rules by 11th May, 2018, and should consider the most effective means to take immediate steps to modify their anti money laundering (AML) compliance programmes to accommodate this latest expansion of the AML regulatory regime (specifically the USA’s BSA, AML and Counter-Terrorist Financing (CTF) regulations and associated guidance). Although narrated from a US jurisdictional perspective, non-US financial institutions and regulatory regimes (eg, European Union [EU] under the purview of the European Union’s Anti-Money Laundering Directive) are considered within the scope of discussion. It is acknowledged that non-US financial institutions may be required to adapt their compliance programmes to account for the new US beneficial ownership standards. Therefore, possible approaches toward development of universal operational solutions will be presented and assessed. Finally, this paper observes that the misuse of limited liability companies (LLCs) and offshore financial centres (OFCs) can serve as a harbinger of criminal activity and seeks to encourage further the discussion of due diligence governance and controls within the AML compliance community.