FINCEN PROPOSING NEW DUE DILIGENCE RULES ON BANKS/BROKERAGES

FINCEN is proposing additional due diligence rules on financial institutions, namely, additional "know your customer" (KYC) requirements to alleviate the use of "shell corporations" as a front to launder illicit funds through financial institutions. The new proposed rules will place additional requirements on financial institutions to identify the "true" owners of the corporations by the banks. But the proposed rule change does not require additional due diligence on the other owners of the corporation but to merely identify them which would provide investigative leads to law enforcement in the future. In addition to the identification of the owners, financial institutions will be required to conduct periodic reviews of financial transactions and ownership of the corporation etc. Most if not all financial institutions conduct periodic transactional reviews of their corporate and individual accounts as part of their anti-money laundering regime to protect the institution from civil and/or criminal prosecution under the money laundering statutes. It has been my experience through twenty-two years of conducting money laundering investigations that criminals always utilize a "nominee" or "straw person" to establish and maintain a bank account or corporate bank account to place a layer between the bad guys and their illicit money. I believe that the additional identification of the owners of the corporation may not identify the bad guy and the source of the illicit money flowing through a corporate bank account. Additional due diligence can be completed through other investigative means and database queries.