WASHINGTON: The International Monetary Fund (IMF) said on Tuesday that the United States was moving too slowly to prevent the use of shell and front companies to hide ownership.
The IMF said US regulators had made little progress toward the need to require that banks know who ultimately is behind the companies for which they handle money.
The issue is important to policing money laundering and tax evasion, the IMF noted, and action was recommended eight years ago by the Financial Action Task Force, which comprises the world’s leading economies and financial centres.
It noted that US regulators have drawn up some draft regulations that would toughen requirements for banks and other financial institutions to learn the identity of beneficial owners of accounts.
“But these measures... are progressing slowly,” the IMF said in its annual assessment of the US economy and financial system.
And the report said that the changes proposed by US regulators, including draft rules from the Treasury released a year ago, might not fully address the problems identified by the FATF.
“The lack of sufficient transparency may impact the authorities’ effectiveness in identifying and prosecuting persons who commit money laundering using US companies and trusts, including laundering associated with taxes evaded in the United States and abroad.”
The US and European governments have sought to crack down on tax avoidance as a way to boost government receipts, and Washington has also stepped up its investigations into illicit or banned money movements by criminals and countries and people under official sanctions, such as Iran and designated terror groups.
But the United States continues to allow the use of shell and front companies that mask who is the ultimate beneficial owner of those companies.
The IMF said that the inability of law enforcement agencies, for example, to be able to determine the beneficial ownership of companies or trusts “may curtail how effective the authorities can be in pursuing criminally persons who misuse US corporations to launder proceeds generated domestically as well as abroad or to trace and recover their illicit assets.”
Published in Dawn, July 8th, 2015