US Treasury issues new rules on customer due diligence, but gaps remain and more action needed

Transparency International-USA welcomes the Department of Treasury’s issuance of final rules setting forth explicit requirements for financial institutions to identify the beneficial owners of legal entity customers as a first step but calls for more action to address the misuse of anonymous companies. 

“Financial institutions have a crucial role to play as the first line of defense against the transfer of corrupt funds. It is common for those trying to conceal their involvement in bribery and other forms of corruption to hide their identities behind complex webs of shell companies,” said Claudia J. Dumas, President and CEO of TI-USA.

While TI-USA supports the efforts of the U.S. Treasury and specifically FinCEN’s efforts to address the need to collect beneficial owner information on the natural persons behind legal entities, the rule has significant gaps. 

The rules do not sufficiently capture those who can control an anonymous company because in the definition of “control,” it conflates senior management and executive officers of corporate entities with the beneficial owners.  Often officials named in leadership positions in anonymous companies are figureheads and control of the entity is exercised through other means-- a problem highlighted by the recently released Panama Papers. TI-USA proposes that financial institutions focus on capturing information about individuals who exercise control of the legal entity for their due diligence purposes.  

The rules also do not extend the requirement to collect beneficial ownership information to accounts established before the rules’ implementation date, creating a major gap in information collected.  It is essential that financial institutions are required to obtain customer due diligence information on existing accounts utilizing a risk-based approach with the understanding that financial institutions would need additional time to complete such actions on existing accounts.

“In addition to identifying the beneficial owner of their corporate clients as required by the rules, financial institutions should carry out appropriate due diligence to determine the reasonableness of the information provided to them including to identify instances such as when kleptocrats use nominees, or if the information provided by the account openers does not stand up to scrutiny, or there are suspicions that the identity of the beneficial owner is not as it is being portrayed, ” said Shruti Shah, Vice President for Programs and Operations at TI-USA.

The collection and verification of information by financial institutions is an important component in attacking the ability of those who control shell companies to move illicit funds through the global financial system, but additional actions are needed in the U.S. and have been identified by TI-USA. Congress should pass the Incorporation Transparency and Law Enforcement Assistance Act introduced earlier this year by Rep. Carolyn Maloney (D-NY) and Sen. Sheldon Whitehouse (D-RI) that would require either Treasury or the states to collect, maintain and update beneficial ownership information on legal entities for law enforcement purposes.  Ideally, this information should be public so that corrupt individuals cannot hide behind layers of anonymous companies. 

In addition, TI-USA also is calling for gatekeepers involved in luxury good purchases such as the real estate industry to be required to conduct due diligence into buyers’ identities and the sources of their funds.

Over the years, the United States has committed itself to combating the flow of the proceeds of foreign corruption into the United States in a number of different fora.  By adopting the reforms recommended above, the United States would send a strong signal that it is taking the necessary steps to uphold its commitments.

Transparency International-USA is the U.S. chapter of the global Transparency International movement, which is present in more than 100 countries around the world. TI-USA is committed to improving governance and combating corruption both in the United States and internationally.

Note to Editors:

For any press enquiries please contact

Shruti Shah
Vice President
Transparency International-USA
T: 202-589-1616
E: .(JavaScript must be enabled to view this email address)


Support Transparency International

Support Us

Legally sanctioned lying: A moment of truth for the Czech Republic?

A court in Prague struck a blow to civil society in the Czech Republic on Friday, ruling in favour of Prime Minister Andrej Babiš in a libel suit brought by TI Czech Republic.

Next week governments can take a step to close down secrecy jurisdictions. Will they?

National financial regulators attending the Financial Action Task Force (FATF) plenary in Paris 16 – 21 February have the opportunity to significantly reduce money laundering, corruption and terror financing. They must not squander the opportunity.

Why don’t the victims of bribery share in the record-breaking Airbus settlement?

Last Friday, French, UK and US authorities announced that Airbus would pay record penalties for foreign bribery. Notably absent in the agreements are any plans to share the penalty payment with the countries where the company was paying bribes.

Nadie es perfecto

Los países con las puntuaciones más altas en el IPC, como Dinamarca, Suiza e Islandia, no son inmunes a la corrupción. Si bien el IPC muestra que los sectores públicos en estos países están entre los menos corruptos del mundo, la corrupción existe, especialmente en casos de lavado de dinero y otras formas de corrupción en el sector privado.

مشكلة في الأعلى

Переполох на верху

Страны с самым высоким рейтингом по ИВК, такие как Дания, Швейцария и Исландия, не защищены от коррупции. Хотя ИВК показывает, что государственный сектор в этих странах является одним из самых чистых в мире, коррупция все еще существует, особенно в случаях отмывания денег и другой коррупции в частном секторе.

Problèmes au sommet

Les pays les mieux classés sur l’IPC comme le Danemark, la Suisse et l’Islande ne sont pas à l’abri de la corruption. Bien que l’IPC montre que les secteurs publics de ces pays sont parmi les moins corrompus au monde, la corruption existe toujours, en particulier dans les cas de blanchiment d’argent et d’autres formes de corruption du secteur privé.

Social Media

Follow us on Social Media