Jed M. Silversmith and Jeffrey M. Rosenfeld
Few Americans consider the United States to be a money laundering haven, but it is. Earlier this year, the European Parliament wrote:
“The USA is seen as an emerging leading tax and secrecy haven for rich foreigners, when in parallel it has reprimanded other countries for helping rich Americans hide their money offshore. It is difficult to estimate how much revenue the United States loses from tax avoidance and evasion, but some have suggested that the annual cost of offshore tax abuses may be around US $100 billion per year.”1
To combat U.S. money laundering by foreign citizens, the Internal Revenue Service (“IRS”) and the U.S. Department of Treasury Financial Crimes Enforcement Network (“FinCEN”) implemented new and strengthened existing reporting requirements for foreign individuals who have financial interests in the United States. Although these regulations are applied broadly, there has been very little discussion about their implementation in the United States. Presumably, there has been even less discussion abroad.
This article focuses on two new, wide-ranging regulatory requirements: 1) the requirement that foreign-owned entities, treated as “disregarded entities” for U.S. federal income tax purposes, file an IRS Form 5472, Information Return of a 25 Percent Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business; and 2) the requirement that all entities report beneficial ownership when opening a bank account. Failure to comply with these requirements may subject foreign nationals and U.S. individuals who do business with them to civil and criminal sanctions. Continue reading “New Treasury Regulations Impose Conflicting Requirements on Foreign Persons with U.S. Interests”
Ariel S. Glasner and Bridget Mayer Briggs
This is the fifth installment in a series of articles. For more background on this topic, please read our first article in the series, An Introduction to Financial Technology; our second article, The FinTech Revolution: Enforcement Actions Brought against FinTech Companies and Their Implications; our third article, The FinTech Revolution: The Impact of Blockchain Technology on Regulatory Enforcement; and our fourth article, The FinTech Revolution: Complying with Anti-Money Laundering Laws to Avoid Regulatory Enforcement Actions.
As news reports of corporate data breaches have become commonplace, companies must be proactive in preventing security breaches and prepared to take appropriate action in the event one occurs. This mantra is particularly true for FinTech companies that, by the very nature of their business, regularly collect customers’ personally identifiable information (“PII”) and other sensitive data. A failure to adequately protect this information, or to disclose the occurrence of a data breach, exposes companies to the very real possibility of government enforcement action.
We have noted previously that a FinTech company that falsely represents its data security practices is subject to an enforcement action by the Consumer Financial Protection Bureau for violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.1 In addition, FinTech companies that sell securities—whether publicly or in a private placement—must comply with applicable securities regulations when it comes to data breaches and their attendant disclosure. Continue reading “The FinTech Revolution: How Data Breaches Can Result in Regulatory Enforcement Actions”