Since 2018 when the U.S. Treasury Department’s Financial Crimes Enforcement
Network (FinCEN) implemented its “Beneficial Ownership Rule” on anti-money laundering
(AML) standards, American financial institutions have been required to uncover the
various layers of ownership related to businesses of their clientele. This added
requirement was an important first step in preventing illegal activities such as tax evasion,
corruption, money laundering, and financing of terrorism. More recently, the Corporate
Transparency Act (CTA) – announced as part of the Biden Administration’s greater efforts
to curb corruption and increase transparency across the financial realm – effectively
amended the Bank Secrecy Act to require corporations, limited liability companies, and
similar entities to report certain information about their beneficial owners (the individual,
“natural persons” who ultimately own or control these companies), while requiring
appropriate reporting of beneficial ownership with respect to both domestic and foreign
entities upon their creation or incorporation. The rule will also govern when this
information must be reported and the depth of information that covered institutions must
provide. Despite these necessary steps towards improving national security, many
compliance departments and specific personnel have struggled to keep up with the old
legislation, let alone establish the necessary framework to comply with the CTA, which
became effective on January 1st, 2022. What many financial service providers have
discovered however is that with the right systems in place, verifying complex ownership
layers has become much less daunting in recent years.
Financial criminals, specifically those involved in web-based money laundering
activity, thrive on anonymity. Concealing one’s identity and trail of transactions is the key
to eluding the proper authorities. Criminals often utilize anonymous shell companies to
move illicit funds across international borders under the guise of seemingly legitimate
businesses. All told, billions upon billions of corrupt dollars are moved and effectively
laundered through shell companies on an annual basis. Though these businesses
themselves exist and are incorporated legally, the funds moving through them are often
derived from corruption, drug and human trafficking exploits, and other criminal
derivatives. Until recently, the bulk of these activities were able to be performed relatively
unimpeded, allowing for further expansion of these already increasingly complex webs of
beneficial ownership. With the lines between legitimate and illegitimate businesses further
blurred, this provided additional layers of security to criminals and politically exposed
persons (PEPs) seeking to clean their dirty money through avenues such as the ever-lucrative American real estate market (which has been riddled with shady foreign
investment for the greater part of the last decade). As such, increasing transparency with
respect to beneficial ownership is important because it requires financial institutions to vet
their clients and eliminate anonymity by identifying the parties behind these businesses.
Aside from identifying and reporting bad actors to the proper authorities, improving
know your customer (KYC) protocols can prevent financial institutions from being used by
criminals and their shell companies to move these funds. In doing so, banks can better
avoid crippling financial penalties and potential sanctions for their involvement, knowingly
or unknowingly. Banks and lenders should be collecting and collating data and
identification documents pertinent to the their customers, conducting background checks,
running historical checks for connections to criminal activity or political exposure, all while
maintaining an ongoing, risk-based AML screening system. Doing so however can be a
daunting and costly process for financial institutions small and large. With the wealth of
new AML regulations that have piled up in recent years, it is a necessity today to have a
comprehensive and automated solution in place to ensure operational efficiency and avoid
potentially damaging human error – especially when it comes to beneficial ownership.
Given that there are millions of companies, and countless more individuals behind them
across the globe, investigating every client and identifying all layers of ownership manually
is a very time-consuming and highly ineffective way of running a compliance department.
However, one new partnership is making waves in the financial industry; together they
have added a massive database of companies to an already established, comprehensive
regulatory compliance solution.
To better meet these growing demands, Global RADAR, a leader in financial
regulatory compliance solutions, has enhanced its already robust AML/CFT software
platform to include access to millions of records of companies and corporate data. This
content brings an additional layer of due diligence and visibility to financial institutions
seeking to remain compliant with the CTA/BSA by providing a large and global picture of
corporate entities, executives, directors, and board members. This will allow compliance
and due diligence departments to identify and mitigate risk more efficiently, uncover
possible links to corruption, financial crime, and other threats to financial integrity
amongst their affiliated third parties – all without wasting hours of valuable manpower and
additional resources.
Highlights of this comprehensive enhancement include:
• Access to 200M plus companies worldwide identifying owners and corporate
status
• Access to 275M plus officers
• Access to 140 jurisdictions
• Ability to make educated decision in real-time by understanding the context
behind a person or legal entity they are investigating
• Saving time by quickly identifying cross-border links between companies
and people via a single source, rather than searching through global
registries individually across different jurisdictions
Having access to an unprecedented database of pertinent financial information, coupled
with the easy-to-use workflows provided by Global RADAR software is truly a dream come
true for any compliance department struggling to keep up with client onboarding and
monitoring. With the various coverage options provided by Global RADAR, identifying
beneficial ownership is no longer burden to money laundering and fraud prevention.
Having an effective, automated software solution to do the heavy lifting with respect to
regulatory compliance provides the foresight needed for the modern financial institution to
thrive through the 2020’s and beyond.
