New Financial Rules in Place: Panama Papers

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May 6, 2016 (WASHINGTON) One of the responses from the White House to the Panama Papers are a set of new legislative proposals, as well as rules from the Treasury Department. They follow a series of rules and agreements passed in the recent past to improve transparency in the banking system.

The Panama Papers revealed the use of off shore accounts to hide funds from taxing authorities around the world, not just the United States. Shell companies usually do not identify the owner from the get go, and allow the owner to trade, get bank accounts and move assets, without identifying the physical person that owns it. This is known as the beneficial owner.

While shell companies are used for legal goals around the world, such as buying real estate, some of them have been used to launder money, and finance terrorism. The new rules will require that  “banks , mutual funds, and other financial institutions – to find out and verify who actually owns and profits from the companies that make use of their services, i.e, the “beneficial owner.” Under this rule, if an entity (like a shell company) opens an account at a financial institution, that institution will be required to identify and verify the real people actually behind that entity. And law enforcement can then seek out that information from those institutions.”

This will increase transparency and allow law enforcement better access in case somebody is trying to launder funds. These new rule also will apply to foreigners doing business in the United States. These entities will also be required to obtain an IRS  tax identification number, (EIN). In effect it would also help our government reciprocate with other tax authorities around the world.

You can read more about these new rules at the White House Press release. 

More:

The Panama Papers: The Larger Picture

The Panama Papers and Real Estate in San Diego

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