Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. Programming Note: We’ll be off this Monday for Presidents Day but will be back in your inboxes on Tuesday. It took a decade for Congress to pass a bill to crack down on anonymous shell companies — a tool used by criminals and other scofflaws to avoid the taxman and the cops. Now, the 2021 law’s biggest advocates warn that the Biden administration is poised to bungle the execution if it doesn’t change course. Lawmakers are preparing to voice their disapproval. The source of the growing angst is the Treasury Department’s Financial Crimes Enforcement Network. The agency — responsible for enforcing anti-money laundering safeguards — is in the process of proposing rules implementing the bipartisan shell company law. The legislation was a political heavy lift because it requires millions of business entities to disclose their ownership information to the government. Lawmakers envisioned that the data would be made available to law enforcement and to banks, which are tasked with rooting out criminal activity among their customers. The problem: Transparency advocates and lenders say FinCEN’s proposed design for the government database is deeply flawed and out of step with congressional intent, with too many obstacles for state and local officials and lenders.
- The Financial Accountability and Corporate Transparency Coalition, a driving force behind the law, is urging FinCEN to drop an “unfounded requirement” that state, local and tribal authorities obtain a court order to access the beneficial ownership directory.
- FACT Coalition policy director Ryan Gurule told MM that the rule “creates substantive and procedural hurdles that didn't exist in the statute and that threaten to undermine the purpose of the directory in the first place.”
- The American Bankers Association is calling on FinCEN to withdraw the proposal.
- Bankers are livid that the plan would restrict their usage to simply meeting existing requirements that they collect customer data — walling off the information from other bank efforts to identify suspicious activity or investigate sanctions evasion.
- “The way they’ve interpreted it is so limiting it’s unclear if banks will even use this,” Bank Policy Institute senior vice president of government affairs Cara Camacho told MM.
- Transparency watchdogs also want FinCEN to scrap a separate proposal that would allow businesses to avoid disclosure by saying they’re unable to identify all their owners.
Congress is watching and preparing to weigh in. A spokesperson for Senate Budget Chair Sheldon Whitehouse, a key driver behind the law, said the Rhode Island Democrat “shares concerns that have been raised about the proposal and plans to file a comment with Treasury soon.” Why is this happening? FinCEN may be erring on the side of privacy concerns, which Republicans like House Financial Services Chair Patrick McHenry have raised. But McHenry and Rep. Blaine Luetkemeyer told FinCEN Thursday that in their eyes the database rule still falls short on that front. “Chairman McHenry and Subcommittee Chairman Luetkemeyer’s comment letter makes clear that this rulemaking — like the previous rulemaking — fails to adhere to congressional intent,” McHenry spokesperson Laura Peavey said. But Elise Bean, whose work on the issue goes back to investigations she helped run for former Sen. Carl Levin, told the agency that it’s failing to strike the right balance and is going beyond what the law demanded on privacy. “The proposed rule at times seems to elevate creating a secure database over the [the law’s] other, equally important objectives,” she said. FinCEN told MM that it is committed to boosting transparency while also “making this historic beneficial ownership database a highly useful tool for all stakeholders, including financial institutions, and others.” “We take feedback from public comments on FinCEN’s proposed rule very seriously and are carefully considering all comments as we complete our work.” Happy Friday — Have a great long weekend. Send tips to zwarmbrodt@politico.com and ssutton@politico.com.
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