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Bipartisan bill would make trust companies investigate foreign clients

Congress comes back from a two-week spring break on Monday.
U.S. Capitol building

A bipartisan bill introduced in the wake of the Pandora Papers would make trust companies investigate foreign clients hoping to store money and assets in the United States.

Loopholes in current laws allow trust companies — including some in Sioux Falls — to serve clients who have been credibly accused of corruption, crime, and profiting from human rights, labor and environmental abuse, the Washington Post and International Consortium of Investigative Journalists reported.

The new bill, dubbed the Enablers Act, would address this issue.

"Banks are already required to investigate their clients and sources of wealth, but trust companies, lawyers, investment advisers, accountants, art dealers, public relations firms and other professionals have been excluded from due-diligence rules — a loophole regularly criticized by financial crime experts and international watchdogs," the Post reported. "The proposed legislation, experts say, represents the most significant change of anti-money-laundering rules since 9/11."

The Enablers Act, which amends the 1970 Bank Secrecy Act, was introduced last week by Reps. Tom Malinowski (D-N.J.), Maria Elvira Salazar (R-Fla.), Steve Cohen (D-Tenn.) and Joe Wilson (R-S.C.).

The representatives cite revelations about the role of South Dakota trusts in their press release:

"The Washington Post reported this week that American trust advisors in South Dakota helped a Colombian businessman launder drug money, and two Ecuadorian brothers hide millions stolen from a government bailout in their homeland."
Caucus Against Foreign Corruption and Kleptocracy

“The Pandora Papers reveal how corruption undermines democracy," Rep. Cohen said in the release. "All around the world, countries are being looted and the most vulnerable people victimized by their elites. These kleptocrats then launder that money to the West where they enjoy the high life — spending the money on luxury cars, penthouses, jets, and opulent parties. Some also spend it on intervening in our democracy, gaining influence in our politics and elites and working to undermine the rule of law. In order to fight corruption, we must curb the enablers."

The Enablers Act says the Treasure Department must create anti-money laundering safeguards and authorize an agency to enforce those requirements by 2023.

Malinowski and Salazar say the new requirements won't impose and unfair burden.

"The vast majority of American businesses potentially affected are law-abiding contributors to our economy, and they know who their customers are and how they make money," they wrote in a fact sheet. "It doesn’t require the business to become their own investigator and uncover illegal money laundering — it only requires them to ask a few basic questions of their customers."

The representatives say banks already have to do this:

"For example, if you wire a lot of money from a bank in the Caymans, American banks will file a suspicious activity report. All this does is flag the transaction so everyone can make sure it’s going from one legitimate account to another. Another example is if you walk into a local bank with a suitcase of a million dollars to open an account, they’re obligated by law to ask you who you are, where the money came from, what your address is…etc."