Congress currently is considering several gatekeeper bills, including: the “Incorporation Transparency and Law Enforcement Assistance Act” (S. 2489, sponsored by Senator Sheldon Whitehouse, D-RI; and H.R. 4450, sponsored by Representative Carolyn Maloney, D-NY); and the “Stop Tax Haven Abuse Act” (S. 174, Senator Whitehouse; and H.R. 297, Representative Lloyd Doggett, D-TX). All four of these measures contain provisions that would regulate many lawyers and law firms as “formation agents” (and hence, “financial institutions”) under the Bank Secrecy Act and subject them to the Act’s anti-money laundering (AML) and suspicious activity reporting (SAR) requirements when they help clients establish companies, trusts or certain other entities. S. 2489 and H.R. 4450 would also require lawyers, businesses and state secretaries of state to gather and maintain extensive “beneficial ownership” information on the companies they help create and make the information available to federal law enforcement authorities.
S. 2489 was referred to the Senate Judiciary Committee while H.R. 4450 was referred to the House Financial Services Committee. In addition, S. 174 was referred to the Senate Finance Committee, and H.R. 297 was referred to the House Ways & Means and Financial Services Committees. In December 2011, the ABA sent a detailed letter to all members of the Senate Homeland Security & Governmental Affairs Committee expressing its strong opposition to the previous version of the “Incorporation Transparency and Law Enforcement Assistance Act,” (S. 1483, sponsored by then Senator Carl Levin, D-MI; 112th Congress). However, no action was taken on the previous bill, nor have any committee hearings or markups been scheduled on any of the four pending bills so far during the current 114th Congress.
The ABA has also expressed concerns over a proposal by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) that would establish new customer due diligence requirements for financial institutions. In its May 4, 2012 comment letter to FinCEN, the ABA objected to language in the agency’s Advance Notice of Proposed Rulemaking that would require law firms to disclose confidential information about their clients’ identities and beneficial ownership whenever they receive advance legal fees from their clients and deposit those funds in the firms’ trust accounts, or if they establish new bank accounts on behalf of clients. The ABA comments also expressed concerns that the FinCEN proposal could impose unreasonable and excessive burdens on many lawyers and law firms with client trust accounts and could undermine both the confidential lawyer-client relationship and traditional state court regulation of lawyers.
On October 3, 2014, the ABA submitted a second comment letter to FinCEN in response to the agency’s updated customer due diligence proposal. In those comments, the ABA urged FinCEN to include language in its final rule clarifying that when lawyers or law firms open new client trust accounts at financial institutions, they need only disclose their own beneficial ownership information, not the identity or beneficial ownership of their clients.