Congress currently is considering several gatekeeper bills, including: the “Incorporation Transparency and Law Enforcement Assistance Act” (S. 1465, sponsored by Sen. Carl Levin, D-MI; and H.R. 3331, sponsored by Rep. Carolyn Maloney, D-NY); the “Stop Tax Haven Abuse Act” (S. 1533, Sen. Levin; and H.R. 1554, Rep. Lloyd Doggett, D-TX); and the “Cut Unjustified Tax Loopholes Act” (S. 268, Sen. Levin). All five 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. 1465 and H.R. 3331 also would 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. 1465 was referred to the Senate Judiciary Committee while H.R. 3331 was referred to the House Financial Services Committee. In addition, S. 1533 and S. 268 were referred to the Senate Finance Committee and H.R. 1554 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, 112th Congress). So far during the current 113th Congress, no committee hearings or markups have been scheduled on any of the five pending bills.
The ABA also has expressed concerns over a recent proposal by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) that would establish new 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. In its comments, the ABA expressed concerns that the FinCEN proposal, if adopted, 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.