Posted by Brian Monroe - email@example.com 05/24/2021
ACFCS Exclusive Contributor Report: The Corporate Transparency Act Introduces Beneficial Ownership Disclosure Requirements for Investment Funds
By Shae Armstrong, partner, Bradley Arant Boult Cummings LLP and Jennifer Commander, associate, Bradley Arant Boult Cummings LLP
June 21, 2021
A just-passed piece of legislation crafted to bolster countercrime defenses and crack open beneficial ownership bastions, a historical haven for criminals of all stripes, has lesser-known tethers for certain segments of the investment sector – a critical pitfall that should not be lost on compliance teams.
In May 2020, a leaked investigation bulletin prepared by the U.S. Federal Bureau of Investigation (the “FBI”) conveyed the FBI’s concern that “threat actors” are likely using private fund structures “… to launder money, circumventing traditional anti-money laundering (AML) programs.”
The FBI states that “threat actors” encompass both “financially motivated criminals and foreign adversaries.” The report further posits that AML compliance programs within the U.S. private funds industry are not sufficient to combat money laundering by global economic criminals.
The International Monetary Fund estimates that money laundering holds between two and five percent of the annual global gross domestic product, and the World Bank reports the world’s gross domestic product as approximately $83.4 trillion.
Hence, money laundering is estimated to be a $2.9 trillion annual industry.
Further, the United Nations Office on Drugs and Crime reports that less than one percent of illicit laundered funds are seized or frozen. In the U.S., the data tracks the same.
The U.S. Department of the Treasury’s National Money Laundering Risk Assessment of 2018 approximated that money laundering within the U.S. was a $300 billion business; yet, according to the Internal Revenue Service (the “IRS”), during this same period, the U.S. government only confiscated approximately $4 billion in assets derived from illicit funds.
Coincidentally, about six months after the FBI memo was leaked, the U.S. Senate overrode President Trump’s veto of the National Defense Authorization Act (the “NDAA”) on January 1, 2021.
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