US Mulls New Rule for Banks to Identify Shell Co Owners
Washington: In the wake of the Panama Papers leak, the US is mulling introduction of a new rule that would require banks to identify owners of shell companies as part of efforts to plug a major loophole in its banking system, according to a media report.
“The rule is meant to close a major loophole in the American banking system that enables the sorts of secretive financial manoeuvres that were thrustintothespotlightthisweekwith the leak of millions of documents from a law firm in Panama,” The New York Times reported on Wednesday.
Under existing federal regulations, banks with American branches in the US are required to “know their customers” who open accounts in the country. “But those rules have been significantly weakened because banks have not been required to know the identities of customers who set up accountsinnamesofshellcompanies,” the daily said. T he prop o s e d Customer Due Diligence rule is an attempt to close that loophole, a treasury official said.
The new rule will require banks to find out the identities of any individual whoowns25%ormoreofcorporateentities that open bank accounts, as well as any individual exercising control over those entities, the report said. The White House, meanwhile, differed with Democratic presidential aspirant Bernie Sanders who had warned that it would be a stamp of approval for Panama as a tax shelter while opposing the US-Panama Free Trade Agreement. “The US-Panama Free Trade Agreement did not apply to tax measures and one reason for that is that in 2011, under President (Barack) Obama’s leadership, the US and Panama did conclude a Tax Information Exchange Agreement,” White House press secretary Josh Earnest told reporters.
These are the kinds of agreements that the US maintains with other countries to promote tax transparency in creating a major disincentive for US citizens to use a country like Panama, in this case, to circumvent tax laws, he said. “All of thishaspromotedgreatertransparency in the context of international financial transactions. That is important because it will allow the international communityandtheUStodothingslikefightcorruption, to crack down on individuals who are trying to use shell corporations to avoid paying their fair share in taxes. Italsoisawayforustodetectindividuals or entities that are trying to circumvent US financial sanctions,” Earnest added.
Treasure marked with X