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How a new federal rule aims to curtail money laundering

On Behalf of | Jan 31, 2024 | Money Laundering

Money laundering is a serious concern for federal regulatory authorities. Money laundering involves obfuscating the origins of capital, often because people violated the law to make money. Many organized criminal efforts involving drugs or human trafficking need to launder their money to use it for major purchases. Those involved in terrorism also try to hide where they get their money and how they use it.

Money laundering may involve passing funds through an intermediary business as a way to confuse others and hide the true origins of those resources. Despite numerous laws prohibiting money laundering and other manipulative financial practices, they are still relatively common crimes.

A new federal law that went into effect this year aims to curtail money laundering within the United States by identifying those involved with certain business organizations.

Businesses must make more disclosures now

The Corporate Transparency Act created a new legal obligation for businesses operating in the United States. New and existing companies alike having file paperwork with the Financial Crimes Enforcement Network (FinCEN) detailing who has a beneficial ownership interest in the company.

Major investors and also those who assisted with the initial formation of the company must provide identifying information to FinCEN. That way, the government contract scenarios in which businesses have relationships with one another because of who holds an interest in the company.

The need to identify those playing a role in corporate business operations makes it easier to track the flow of capital from one organization to another and potentially bring charges against those illegally laundering ill-gotten gains.

At the end of the day, learning about, and adhering to, new federal regulations could help people avoid accusations of money laundering or other corporate crimes.