A bipartisan effort to require American businesses to develop anti-money laundering programs to better detect and deter dirty money from investment in the U.S. is making its way through Congress.
American banking institutions are currently required to conduct due diligence to ensure money being processed through the U.S. banking system is not “dirty.” Dirty is a term used for money flowing into the U.S. for the purpose of money laundering—the gradual washing of money in benign investments which confuses and hides the shady origin of the money. According to the Congressional Caucus Against Foreign Corruption and Kleptocracy (CAFCAK) ), “the U.S. is a top destination globally for dirty money.”
Currently under consideration, the new bill is called Establishing New Authorities for Business Laundering and Enabling Risks to Security Act (Enablers Act). The Enablers Act would amend the Bank Secrecy Act (BSA) established in 1970. The BSA was the first money laundering law passed in the U.S. and instituted reporting requirements for American businesses. The Enablers Act is designed to close a loophole that exists in the earlier legislation around so-called financial “gatekeepers,” individuals technically outside the banking system who “enable” or shepherd financial transactions through the U.S. financial system. At present, these gatekeepers, or financial “middlemen” are not required to conduct due diligence on the money and clients they are driving into American investments.
Representative Joe Wilson, who is partnering with Representative Tom Malinowski said, “Middlemen in foreign transactions should be subject to the same anti-money laundering checks as banks, and this brings us one step closer. Nobody should be able to hide behind blood money to exploit democratic institutions for their benefit.”
Specifically, the bill would expand the definition and due diligence required of financial institutions to apply to the following types of money and transaction brokers:
- People who work in marketing, communications, public relations, or services that provide another person deniability or anonymity.
- Those who provide investment advice for compensation.
- Individuals who work in the trade of buying, selling, or brokering deals involving collectibles, art, objects of art, and antiques.
- Law firms, attorneys, or notaries involved in financial transactions or activity on behalf of someone else.
- Public accounting firms and those who are Certified Public Accountants (CPAs).
- Staff of trusts and trust company service providers.
- Individuals and businesses involved in providing third-party payment services.
Investment in foreign bank accounts and legitimate offshore tax havens is legal and a sound financial choice for some. While banking institutions are required to flag potential money launderers, individuals who market, broker, and facilitate large money deals are not. The Enablers Act would require the rest of the financial industry to conduct due diligence and examine the source of wealth of potential investors.
The U.S. offers robust, secret offshore tax opportunities to investors, oligarchs, and others around the world. Notes CAFCAK, “Money laundering is the tool of choice for dictators, criminals, and terrorists.” The Enablers Act is a bipartisan effort to reduce money laundering in the U.S. and stem its prevalence around the globe.
If you work or participate in the financial industry, this new legislation could impact you. For guidance and counsel on achieving compliance, speak with an experienced tax attorney to identify and craft business practices that may be subject to the new legislation if it becomes law.
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