16/02/24

US: Republicans spar with Treasury officials over rules to fight financial crime

As published on: axios.com, Friday 16 February, 2024. 

A discussion on individuals' and small businesses' right to transact privately got heated during a House Financial Services hearing on financial crime Wednesday.

Why it matters: Democratic policymakers were focused on protecting the public from criminals and terrorists, but Republicans focused on keeping open opportunities for small businesses and individuals.

It all circles back to a beneficial ownership reporting regime, which will on Tuesday start requiring many companies to report who owns or controls them. The regime began accepting filings at the beginning of the year.
At the House hearing, top staff from the Treasury and the Financial Crimes Enforcement Network (FinCEN) fielded questions from lawmakers about expectations around the new requirement.
Between the lines: It was raised under the Corporate Transparency Act enacted in 2021 to curb illicit finance.

The required report would include identifying information about the people who directly or indirectly own or control the company.
Yes, but: Many of the small businesses that would be required to report don't even know about it but could be hit with fines for being out of compliance.

What they're saying: House Financial Committee Chair Patrick McHenry (R-N.C.) honed in on how burdensome the new reporting requirements are.

Ranking member Maxine Waters (D-Calif.) applauded Treasury for cracking down.
"Republicans don't want you to know that it was Treasury that brought the criminal crypto exchange Binance and its executives to justice with a $4.3 billion settlement," she said.
What's happening: Rep. Bill Huizenga (R-Mich.) expressed concerns about Fincen providing financial institutions with suggested search terms and merchant category codes to identify suspicious transactions.

"I shop at Cabela's. I buy ammo. Am I on a list somehow?" he asked. "Your agency was created to protect Americans and our national security, not spy on them."
Others questioned whether this was information that should require a warrant.
Meanwhile, Rep. Brad Sherman (D- Calif.) said: "If bitcoin ever becomes a currency, you're gonna have a tough time."

The other side: Brian Nelson, undersecretary of financial intelligence at the Treasury Department, and Andrea Gacki, of FinCen, explained the reasoning behind the regime.

Gacki said: "This provides a greater degree and a greater way of getting transparency and compelling shell companies that are acting as fronts for the movement of illicit money."

"We are taking pains to ensure that our filing system is simple, secure, easy to use — something that can be done without the need for professional help. We have been told it's taking most entities with simple structures no more than 20 minutes to fill out this form."
Of note: Tom Emmer (R-N.C.) took note of the Treasury's view that digital assets were not a popular tool for Hamas nor the Palestinian Islamic Jihad.

Nelson said Emmer was "correct."
"We don't expect the number is very high," Nelson added.
Emmer asked whether the Treasury should correct the record with their own data while a group of senators is using false figures to legislate.
Our thought bubble: There's always a balance to be struck between opportunities for risk-takers and the risk aversion of society at large.

Tags

US US Treasury Republicans Financial crime