During the 113th Congress, many gatekeeper bills were introduced, including: the “Incorporation Transparency and Law Enforcement Assistance Act” (S. 1465, sponsored by then Senator Carl Levin, D-MI; and H.R. 3331, sponsored by Representative Carolyn Maloney, D-NY); the “Stop Tax Haven Abuse Act” (S. 1533, Senator Levin; H.R. 1554, Representative Lloyd Doggett, D-TX; and H.R. 3666, Representative Rosa DeLauro, D-CT); and the “Cut Unjustified Tax Loopholes Act” (S. 268, Senator Levin). All of these measures contained provisions that would have regulated many lawyers and law firms as “formation agents” (and hence, “financial institutions”) under the Bank Secrecy Act and subjected 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 would also have required 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; H.R. 1554 was referred to the House Ways & Means and Financial Services Committees; and H.R. 3666 was referred to the House Ways & Means, Financial Services, and Budget 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). However, no committee hearings or markups were held on any of the six bills and the measures died at the end of the 113th Congress.
On January 13, 2015, the “Stop Tax Haven Abuse Act” was reintroduced by Representative Doggett and Senator Sheldon Whitehouse (D-RI) as H.R. 297 and S. 174, respectively. H.R. 297 was referred to the House Ways & Means and Financial Services Committees, and the measure currently has 41 Democratic cosponsors. S. 174, cosponsored by Senators Jeanne Shaheen (D-NH), Barbara Mikulski (D-MD), and Gary Peters (D-MI) was referred to the Senate Finance Committee. No hearings or other action has been scheduled on either bill to date.
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.