Posts Tagged ‘S. 569’

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Weekly term: beneficial owner

August 11, 2010

There are two types of owners in this world:  those who own it on paper, and those who really own it.  The “beneficial owner” is a fancy way of referring to the real owner.

The Financial Action Task Force, the foremost anti-money laundering international body, offered this definition of beneficial ownership in their publication, The Financial War on Terrorism:  A Guide*:

Beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted.  It also incorporates those person who exercise ultimate effective control over a legal person or arrangement.

This is especially relevant within the context of jihadist financing because Saudi Arabia, Iran, their “charities,” their millionaires, and their terrorist groups use shell companies, front investors, puppet charities, correspondent banks, secret terror cells, and other cat’s-paw forces to buy assets in the West.  The hidden actor is the beneficial owner.

The Incorporation Transparency and Law Enforcement Assistance Act, a bill sponsored by Sen. Carl Levin, is still lingering around in the Senate.  Levin says that S. 569 would help expose beneficial ownership of, for example, Iranian-backed ventures.  In theory, that would be a good thing, but when you read the actual bill it’s actually just a law to help foreign countries crackdown on tax evasion by their own citizens doing business in America, and the bill’s “beneficial owner”… is Carl Levin…

*FATF, The Financial War on Terrorism:  A Guide (Paris:  OECD Publications Service, 1999).

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Treasury gaffe: Official admits no new legislation needed

June 7, 2010
Daniel Glaser photo

Deputy Asst. Secretary Daniel Glaser

A gaffe in Washington, D.C., is when a public official accidentally tells the truth.  As a political favor to Sen. Carl Levin, the Obama administration became a forceful advocate for S. 569, an incorporation transparency bill that would supposedly help expose and prevent terrorist financial activity in the U.S. through shell corporations.

Last November, Assistant Secretary for Terrorist Financing David S. Cohen told Congress that the administration believes S. 569 would be “an important step in the right direction on this issue.”

But in recent testimony, Deputy Assistant Secretary Daniel Glaser (who actually reports to Cohen!) had a surprising exchange with Rep. John Adler (D-New Jersey).

Read the rest of this entry ?

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Rift in Treasury?

March 12, 2010

According to MoneyLaundering.com, a leading AML news source, federal regulators released guidance last Friday suggesting that banks take greater steps to verify the beneficial ownership (the true owners) of their customers.  In theory, this would help uncover shell companies in the U.S. acting in behalf of nefarious countries like Iran.

MoneyLaundering.com spoke with Heather Lowe, lawyer for the Global Financial Integrity program, who said the guidance was “unexpectedly weak” because many insiders anticipated a requirement that banks “shall” rather than “may” verify beneficial ownership.

FinCEN, one of the four major federal agencies under Treasury’s Office of Terrorism and Financial Intelligence (TFI), was one of the regulators endorsing the new guidance.  It is somewhat surprising that FinCEN would endorse the weak guidance given the strong support for beneficial ownership disclosure by David S. Cohen, Assistant Secretary for Terrorist Financing—one of TFI’s other major agencies.

In testimony before Congress last November, Cohen said that, “the Administration believes that S. 569,” which would require the disclosure of beneficial ownership information by corporations, “is an important step in the right direction on this issue…”

James H. Freis Jr., the director of FinCEN, like most senior officials at TFI, is a Bush-era holdover and financial crimes expert.  David Cohen, on the other hand, is a Democrat lawyer selected by Pres. Obama and Sec. Tim Geithner.  In fairness to Cohen, his testimony included comments that ownership transparency has to be balanced with the need for financial and legal efficiency, and he does have a legal background in white collar financial crime.

Still, it would appear that Mr. Cohen has aligned himself very closely with Sen. Levin and the “incorporation transparency” proponents, while more experienced Treasury officials are more circumspect.

If my suspicion is incorrect, I would welcome a rebuttal from any Treasury insider.

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Time Magazine goes to bat for batty bill

February 4, 2010

Ken Stier at Time Magazine has written an illogical piece of “journalism,” that reads like a lobbyist’s brief in behalf of S. 569, Carl Levin’s “incorporation transparency” bill that would supposedly help control terrorist financing.

Stier starts off his article by suggesting that nobody knew and no action could be taken against the Iran’s shell Alavi Foundation (which owns property in the United States to help funnel money back into Iran’s nuclear program) because we lack a law such as the one proposed by Levin.  But Rachel Ehrenfeld has been writing for years about the failure to crackdown against the Alavi Foundation.  The nature of its ownership was not unknown.  The delay in action against Alavi was a failure of reluctant law enforcement, not a failure of existing federal law.

From Time:

Managers of an Iranian charity started by the Shah faced a dilemma with its American properties, as Washington tightened a squeeze on all entities tied to the Islamic Revolutionary Government. But U.S. law allowed a simple solution for the renamed Alavi Foundation: disguise its properties’ real owners through the use of shell companies, multiple ones if need be.

So, its 36-story skyscraper in midtown Manhattan, registered as the 650 Fifth Avenue Company, was owned by Assa Corporation, a New York shell company, which listed its owner as Assa Company Ltd., a Jersey, Channel Islands entity. In most cases that’s as far as investigators get — but here authorities were eventually able to determine that Assa was in fact entirely owned by the state-owned Bank Melli, which is banned in the U.S. for supporting Tehran’s nuclear program.

Exposing this entirely legal labyrinth of ownership took years of interagency pick-and-ax work. In the end it demonstrated how nefarious activity — even as high profile as this — can go on for years, right under authorities’ noses. Read the rest of this entry ?

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Analysis of S. 569 on OpenCongress.org

January 25, 2010

One of the most popular posts here on Money Jihad (according to WordPress‘s stats) has been my review of the Incorporation Transparency and Law Enforcement Assistance Act (S. 569) currently proposed in the U.S. Senate.

OpenCongress.org has posted the lead and link to my original post here. Take a look!  OpenCongress provides blog links to additional perspectives on the bill, including an October article I had never seen before from Heritage.org that called S. 569 “another Sarbanes-Oxley” that would put small businesses “under seige.”

Incorporation Transparency and Law Enforcement Assistance Act

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“Anti-money laundering” bill before U.S. Senate

January 1, 2010

The U.S. Senate considered legislation called “The Incorporation Transparency and Law Enforcement Assistance Act” throughout 2009 (S. 569), and they’re not done yet.  At first glance, the bill appears to be a helpful measure to force foreign-owned businesses that incorporate in America to disclose the identity of the true corporate owners (technically known as “beneficial owners”).

Sen. Carl Levin (D-Michigan), the bill’s principal sponsor and advocate, has been using terrorism-related examples lately like arms trafficker Viktor Bout and Iranian shell companies as the primary arguments for the bill’s passage.  Unfortunately, when the legislation is examined more closely, it starts to look like “yet another” Carl Levin witch-hunt against garden variety tax evaders.

The bill would require states to collect the ownership information at the time of incorporation.  The states are further required to provide that information to state or federal law enforcement upon request.  Fair enough.  But take a look at subsection (ii) of Sec. 2009 (a)(1)(D) below.  If the bill were intended only for the U.S. to uncover attempted incorporation by terrorist front groups, how does it help us to give ownership information to another country unless that country is trying to tax that corporation’s wealth?

(D) Beneficial ownership information relating to each corporation or limited liability company formed under the laws of the State shall be provided by the State upon receipt of–

(i) a civil or criminal subpoena or summons from a State agency, Federal agency, or congressional committee or subcommittee requesting such information; or

(ii) a written request made by a Federal agency on behalf of another country under an international treaty, agreement, or convention, or section 1782 of title 28, United States Code.

In fairness to Sen. Levin and the other sponsors of the bill, maybe they believe that if we play nice and fork over information to other countries, they’ll reciprocate by giving us whatever information we need in the course of terrorist investigations.  But I can’t shake the feeling that this legislation will be primarily used to pursue tax cheats, not jihadists.

Read the rest of this entry ?