US: Disclosure of Beneficial Owners of Companies Key in Tackling Illicit Financial Flow ...Identifies real estate sector as major conduit

…wants financial institutions to be more circumspect The United States of America has observed that for the fight against Illicit Financial Flow (IFF) to record any meaningful success, countries and governments across the world must embrace the policy of Disclosure of Beneficial owners of companies established in their respective country, just as it identified the real estate sector as a major toll for criminals in moving their proceeds of crimes. The Director, Financial Transparency and Regulatory Policy, Office of Terrorist Financing and Financial Crimes, US Department of Treasury, Young Lee, who made the remark during the US Foreign Press Centre virtual briefing on US anti-corruption efforts, argued that: “Corruption thrives in the financial shadows in shell corporations that disguise owners' true identities in offshore jurisdictions with lax anti-money laundering regulations, and in complex structures that allow the wealthy to hide their income from government authorities.” Speaking on the theme: ‘Curbing Illicit Finance’, Lee disclosed that criminals all over the world have formed the habit of hiding their identities behind corporate structures, and laundering their illicit proceeds through real estate. The director further pointed out that this illicit finance, when not tackled, is capable of undermining and impairing good governance in any country, as well as threatening national security and prosperity. He stated that as part of curbing illicit finance, the US has introduced some legislation such as the Anti-Money Laundering Act, 2020, and the Corporate Transparency Act (CTA). Lee said: "This legislation passed with bipartisan support was the culmination of many years of effort to address one of the most significant deficiencies in the US AML regime. That is the lack of a nationwide requirement to disclose information about the actual people who own or control companies, also known as the beneficial owners of at the time of company formation. "This was a deficiency highlighted by the Financial Action Taskforce in its 2016 assessment of the US regime, and was one of the main reasons we received the lowest possible rating for the immediate outcome related to preventing legal entities and arrangements from misuse, from money laundering financing and making sure that beneficial ownership information is made available to competent authorities without impediments." According to him, under the CTA, certain US and foreign companies are required to disclose their beneficial owners to FinCEN, the US Financial Intelligence Unit, at two key points-when they are formed or registered in the United States, and when their beneficial owners change. In addition, he said the CTA also requires certain types of financial institutions in the US, like banks and securities broker dealers, to collect and verify beneficial ownership information when legal entities open up new accounts at their institutions in order to confirm those regulations to the framework of the CTA. "Financial institutions and other private sector organisations must undertake robust due diligence and actively seek to avoid corrupt clients and counterparties to keep our financial systems secure," he added. Other efforts he said the US has deployed in curbing illicit finance and which other countries of the world can emulate included the pursuit of transparency of the US real estate market. Lee noted that: "Lack of transparency into certain parts of the real estate market is a significant regulatory gap that bad actors have been able to exploit. For example, one non-governmental organisation (NGO) study published in 2020 estimates that approximately $2.3 billion has been laundered through the US real estate market over the previous five years."