U.S. National Action Plan on Preventing the Misuse of Companies and Legal Arrangements

The United States is pleased to announce today the publication of our National Action Plan on Preventing the Misuse of Companies and Legal Arrangements.  Publication of this plan is a key deliverable of the G-8 summit, along with agreement today on a set of G-8 principles to enhance transparency of company ownership and control.  These principals, the G-8 Action Plan Principles to Prevent the Misuse of Companies and Legal Arrangements, by G-8 members are crucial to preventing the misuse of companies by illicit actors.

The U.S. has been working closely with partners around the world to combat the criminal misuse of businesses, shell companies, and front companies. These legal entities are used to access the international financial system and facilitate financial crime, while masking the true identity of illicit actors.  These legal entities are also used by individuals and companies to shelter assets and evade taxes.   The U.S. National Action Plan demonstrates the U.S. commitment to combating this global problem.  It promises to assist law enforcement and tax authorities in understanding who actually owns and controls legal entities (i.e., their beneficial owners) and assist cross-border investigations.

Enabling access to beneficial ownership information to law enforcement and tax authorities is an essential component of U.S. efforts to enhance financial transparency.  Other U.S. efforts to enhance financial transparency include global implementation of international standards regarding beneficial ownership through the Financial Action Task Force (FATF).  The U.S. played an instrumental role in working to draft the new FATF standards on beneficial ownership and believes the adoption of the principles by the G-8 today is an important step forward.  Another U.S. initiative to strengthen financial transparency is a rulemaking proposing to clarify customer due diligence (CDD) requirements for U.S. financial institutions so that institutions collect information on beneficial ownership of legal entity account holders.

Today’s G-8 principles make clear that companies should know who owns and controls them and their beneficial ownership and basic information of the companies should be adequate, accurate, and current. Adoption of these principles is a central deliverable of the UK’s G-8 Presidency, and builds on an Illicit Finance Agenda the UK has recently launched for the G-8.  This agenda incorporates three elements: (1) improving transparency of company ownership and control; (2) promoting effective supervision of financial institutions and enforcement of anti-money laundering (AML) obligations; and (3) developing a Sub-Saharan Africa Public-Private Sector Dialogue.  The U.S. worked closely with the UK on the agenda and welcomes adoption of the G-8 principles published today, as well as publication by the UK and other countries of their national action plans for preventing the misuse of companies and legal arrangements.

As part of our Action Plan, the U.S. will continue to forcefully advocate for comprehensive legislation to require the disclosure of beneficial ownership information, including a requirement to identify and verify beneficial ownership information at the time a company is formed. We further commit to clarifying and strengthening customer due diligence requirements for U.S. financial institutions, including through publication of a proposed rule for financial institutions to identify the beneficial owners of legal entity customers. 

In particular, in our National Action Plan, the United States commits to:

• Draft a National Risk Assessment:  Led by the Treasury Department, the United States is updating its national risk assessment to identify major money laundering threats and vulnerabilities. This assessment will include an analysis of vulnerabilities posed by corporate entities and how criminal use them to launder funds.  
• Advocate for Comprehensive Legislation:  The Treasury Department, along with other federal agencies, will continue to advocate for comprehensive legislation on beneficial ownership. There is currently no federal or state requirement to disclose beneficial ownership information. This legislation would be an important step to protect the U.S. financial system and should include:

1. Requirements for covered legal entities to disclose beneficial ownership to states or regulated corporate formation agents at the time of company formation.
2. Requirements for verification of the identity of the beneficial owner.
3. Options for covering legal entities depending on whether the applicant forms the legal entity directly or uses a regulated company formation agent. 
4. Requirements for law enforcement authorities, including tax authorities, to be able to access beneficial ownership information upon appropriate request through a central registry at the state level. 
5. An extension anti-money laundering obligations to company formation agents, including an obligation to identify and verify beneficial ownership information.
6. A mandate that entities provide updated information when changes of beneficial ownership occur within 60 days; and
7. The imposition of civil and criminal penalties for knowingly providing false information. 

• Clarify and Strengthen Customer Due Diligence Standards for U.S. Financial Institutions: As part of the U.S. government’s broader efforts to increase financial transparency, the Treasury Department is currently drafting a rule to develop an explicit customer due diligence obligation for U.S. financial institutions, including a new requirement to identify the beneficial owners of legal entity customers.  This proposed rule would require that financial institutions understand who their customers actually are and provide important information and resources for law enforcement and tax authorities. 
• Work to Enhance International Cooperation:  The U.S. will continue to advocate for increased mutual legal assistance and other forms of international cooperation designed to enhance the transparency of the international financial system including working with our partners to enhance build a framework for identifying beneficial ownership of companies.