Obama Goes After Finance Industry With New Transparency Rules
The White House statement said that Barack Obama will issue new rules that require businesses to identify shell company owners and report their owners to a national registry. The changes aim to combat various financial crimes and improve transparency.
The use of shell companies to hide assets and avoid taxes is in the spotlight following a massive leak of data from the Panama-based law firm Mossack Fonseca, which embarrassed several world leaders and sparked government investigations around the globe into possible financial wrongdoing by the wealthy elite. The International Consortium of Investigative Journalists said it will release a searchable database of more than 200,000 offshore entities on Monday. The Customer Due Diligence rule, in the works since 2012, and the proposed legislation are meant to hinder criminals from using shell companies to hide ownership and launder money, finance terrorism and commit other threats to the global financial system. The final CDD rule will require banks, brokers, mutual funds and other financial institutions to collect and verify the identities of the real people, or "beneficial owners," who own and control companies when those companies open accounts.
Watch: What's Going on Behind the Panama Papers
Financial institutions will have to verify the identity of any person or company who owns more than 25 percent of the company and one live person who controls the company, even if that person owns less than 25 percent. Banks will have two years to get their systems into compliance, said Jennifer Fowler, the Treasury's deputy assistant secretary for terrorist financing. The Treasury said in 2012 that it planned to propose a rule that would clarify and standardize financial institutions' obligations to know the identities of their customers. The measures would make the financial system more transparent and close loopholes that allow for abuse or illegal activity, officials said.