Shell Companies and Beneficial Owners

The Financial Crimes Enforcement Network (FinCEN) will be holding a public hearing on July 31, 2012 to collect information and opinions about its proposed rule that requires financial institutions to identify beneficial ownership of their account holders.  The rule threatens to abolish the current structure that allows beneficial owners to hide behind shell corporations created in offshore jurisdictions, Nevada or Delaware in order to remain undercover.

As any good compliance officer/AML expert/due diligence investigator or El Dorado Task Force member knows shell companies in the United States, or abroad, are great for stashing cash and concealing assets.  Further training has informed us that the concept is positively criminal.  That may be true.  What might also be true is that requiring full disclosure may not have any impact, whatsoever, on criminal activity, money laundering or tax evasion.

More requirements imposed without a corresponding evaluation tool or the support of empirical evidence does not seem like a good idea.  The criminal justice system has taken years to catch onto the idea of an evidence based policy; perhaps the Financial Crimes Enforcement Network should take note.

A resolution to this perplexing scenario will not be easy.  An article that presents viewpoints from both sides can be found here.

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