Proposed FinCEN Rule Should Help FTC Track Down Perpetrators of Fraud

Federal Trade Commission staff filed a comment on a Notice of Proposed Rulemaking published by the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury, in which FinCEN proposed a rule to clarify and strengthen existing customer due diligence requirements for financial institutions under the Bank Secrecy Act. Among other requirements, the proposed Customer Due Diligence Rule would require financial institutions to collect information on the individuals who are the beneficial owners of a legal entity when the entity opens an account.

The comment of the FTC’s Bureau of Consumer Protection and Bureau of Economics notes that the proposed Rule should improve the FTC’s ability to track down those perpetrating fraud against consumers.  FTC staff provided examples from FTC enforcement actions in which individuals used legal entities or "shell" companies to disguise their involvement with fraudulent operations and transfer the proceeds of fraud – instances in which information about the individuals behind a legal entity would have helped the FTC’s law enforcement, including its efforts to quickly shut down fraudulent operations.

The Commission vote to issue the staff comment was 5-0. It was sent to FinCEN Director Jennifer Shasky Calvery on October 3, 2014. (FTC File No. P124402; the staff contact is Karen S. Hobbs, Bureau of Consumer Protection, 202-326-3587).

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