If you have ever worked in a role where you had minutes to review KYC (Know Your Client) information, you can appreciate the information recently released regarding shell companies. In the past, clients could provide anonymous shell companies documentation, without providing additional background information. In the process of reviewing client documentation, this would become an issue if there is no information available to further research on that shell entity via research engines. A process that could normally take 20 minutes, would be dragged on for days until the validity of the client would be verified. According to the ICIJ (International Consortium of Investigative Journalist) lawmakers are attempting to mandate anonymous shell companies to provide beneficial ownerships .
If this legislation were to pass, financial institutions would be require to remediate current client data in order to be in compliance with federal regulations. In particular, those institutions with clients that are Medium to High Risk would be the most impacted. From a Financial Crime expertise, we would recommend implementing an enhance due diligence review on those clients with missing client details that contain anonymous shell companies. In addition, where applicable, we would recommend changes to system logic that would require client to provide information of ownership on all she companies in the on-boarding process.
"It is past time to put an end to the secrecy that allows drug cartels, human traffickers, arms dealers, terrorists to exploit the United States’ banking system… I know that the current holes in our financial system pose a serious threat to national security"