The director of the Financial Crimes Enforcement Network has remarked that “opaque corporate structures” and a lack of accountability to attribute ownership and activities onto real-life identities is muddying the reputation that financial entities hold as trust anchors.
Gaps or breakdowns in the identity processes of shell and front companies in the corporate structure are exploited easily by fraudsters at account opening and during onboarding, to facilitate money laundering.
The remarks were made in relation to an update on FinCEN’s ongoing Identity Project, which since its inception has tried to understand identities which are behind fraudulent transactions. Unlawful activities are perpetuated by untraceable identity processes, leading to corruption, tax evasion, fraud, drug trafficking, and the financing of terrorism.
“Lack of transparency around identity is a global problem”, Andrea Gacki said. “It’s one that necessitates strong responses across jurisdictions, and the public sector working with the private sector to solve these challenges”.
FinCEN said critical milestones were reached in January to protect the integrity of the financial ecosystem. The launch of FinCEN’s beneficial ownership registry followed up the Corporate Transparency Act passed in 2021.
This development imposes mandatory reporting procedures for identities which own or control companies in the corporate structure, especially in the U.S. In four weeks, the Financial Crimes Enforcement Network received nearly 300,000 reports regarding company ownership structures, which are securely held in non-public databases.
Throughout the coming year, the statement indicates that relevant authorities and financial institutions will be given access to this intelligence to fulfil their roles properly.
The data gathered will add to the value of the Bank Secrecy Act.
