U.S. failing to curb money laundering by shell companies: task force report

December 1, 2016 9:19 AM EST

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By Joel Schectman and Brett Wolf

WASHINGTON (Reuters) - The United States received failing scores for its efforts to prevent the laundering of criminal proceeds by shell companies, accountants and real estate agents, the Financial Action Task Force (FATF) said in a report released Thursday.

Overall, the United States had “robust” anti-money laundering efforts, scoring as highly effective at countering terrorism financing, said FATF, an international organization that sets global standards for fighting illicit finance.

But the United States did not do enough to rein in corporate secrecy, presenting “serious gaps” in law enforcement efforts that leave the financial system “vulnerable” to dirty money, the report said.

In its first evaluation of the United States in ten years, FATF scored Washington non-compliant - the lowest possible score - on its ability to determine the true owners of shell companies, sometimes used by money launderers to hide illegal proceeds.

FATF also gave Washington a failing score for its minimal monitoring of non-financial industries sometimes used in money laundering, such as law firms and realtors.

For example, unlike banks, real estate agents in the United States are not required to notify authorities if they suspect a customer is trying to move dirty money through property.

FATF criticized many of these shortcomings in its last evaluation of the United States in 2006, raising concerns about why Washington had still not acted.

“The U.S. views itself as a standard setter among nations,” said Ross Delston, a Washington-based anti-money laundering attorney. “But in key areas, it fails to measure up to international standards, which opens the doors to Panama papers-type transactions and schemes to hide money.”

In a call with reporters, a senior U.S. Treasury Department official highlighted the strong ratings FATF gave the United States for its efforts fighting terrorism finance.

But the official acknowledged the shortcoming raised by FATF. The organization’s criticism that the United States does not requiring companies to disclose their true, or beneficial owners, was correct, the Treasury official said.

The Obama administration proposed legislation to mandate companies to disclose beneficial owners in May, but Congress has not introduced the bill, the official said.

Without such a bill, the official said, “the US will continue to lag behind our global partners.”

The Treasury Department released a rule in May that will obligate banks to collect beneficial ownership information from companies, starting in 2018. But the rule does not impose any transparency requirements on the companies themselves.

International banks, investors and regulators use the FATF scores to help determine the risk level of countries, although experts say it’s unlikely that the ratings will turn away investors from the United States.

In any case, the findings will be “closely studied” by financial institutions,” said Duncan DeVille, global head of financial crimes compliance with money transfer giant Western Union.

(Additional reporting by Yeganeh Torbati; Editing by Bernadette Baum)



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