In its giant military spending package, Congress indicated it wants to exempt insurers and insurance producers from proposed anti-money laundering reporting requirements.
The package is the conference report version of H.R. 6395, the “William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021″ bill. Congress needs to pass the package, or alternative legislation, to keep the military operating normally.
The anti-money-laundering reporting requirements appear on page 2,996 of the 4,517-page conference report PDF file, in Title LXIV — Establishing Beneficial Ownership Information Reporting Requirements.
The section would create a new Corporate Transparency Act,. The act would require some corporations and limited liability companies to send reports about their ownership to the federal Financial Crimes Enforcement Network (FinCEN), in an effort to keep non-U.S. individuals and entities from using anonymous shell companies to launder money or break the law in other ways.
- A copy of the H.R. 6395 conference report is available here.
- An earlier article about FinCEN beneficial ownership reporting regulations is available here.
FinCEN would maintain a database of beneficial ownership filings sent in by new affected companies and by affected companies that change hands.
Government officials could use the FinCEN database for law enforcement and anti-terrorism purposes.
Financial institutions could get information from the beneficial ownership database for purposes of complying with customer due diligence requirements.
The beneficial ownership reporting section exempts many types of companies that already come under the oversight of state or federal regulators from having to send reports about their ownership to FinCEN.
Other Exempt Groups
The list of entities exempted includes commodity brokers, investment advisors that are registered with the U.S. Securities and Exchange Commission, and pooled investment vehicles operated by investment advisors.
The section also exempts “an insurance company (as defined in section 2 of the Investment Company Act of 1940,” and it exempts “an entity — that is an insurance producer that is authorized by a state and subject to supervision by the insurance commissioner or a similar official or agency of a state; and has an operating presence at a physical office within the United States.”
Companies that are reporting companies would have to send FinCEN the full legal names, street addresses and dates of birth of all beneficial owners.
In some cases, companies subject to the FinCEN ownership reporting requirements might have to list U.S. insurance company affiliates or other exempt affiliates in their FinCEN reports.
FinCEN is an arm of the U.S. Treasury Department. The Corporate Transparency Act would require the Treasury secretary to tell Congress if an exempt entity, or class of entities, “has been involved in significant abuse related to money laundering, the financing of terrorism, [nuclear] proliferation finance, serious tax fraud, or any other financial crime,” according to the conference report text.
The Corporate Transparency Act uses of a definition of “financial institution” that includes insurance companies as well as banks and credit unions. Like a bank or a credit union, an insurance company could ask FinCEN about a customer’s beneficial ownership for customer due diligence purposes.
A related provision could help protect an insurance company from liability if federal investigators ask the company to keep a suspicious entity’s account open, to avoid making the suspicious entity aware of investigators’ interest.
— Read Treasury’s Crime Unit Floats New Customer ID Rules for BDs, Mutual Funds, on ThinkAdvisor.