US Mulls New Rule for Banks to Iden­tify Shell Co Own­ers

The Economic Times - - Around The World -

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

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