It looks like a big source of anxiety in the estate planning industry has been resolved, liberating trust companies and other entities to get back to work taking on new business without fear.
As you know, normal "know your customer" regulations designed to make it harder to launder illicit funds already applied to all intermediaries. However, blowback from the Panama Papers incited some in Washington to push additional responsibility to institutions that primarily work with the global elite: art dealers, real estate agents, attorneys and yes, trust companies.
Under the terms of the "Enablers Act," the job of fully investigating where client wealth comes from would have devolved onto these entities. Taking on new accounts would have been an expensive and risky affair, exposing the intermediaries to punishment when bad dollars somehow managed to work their way into the system despite everybody's best efforts.
In other words, it would have been a nightmare with profound chilling effects. A lot of trust companies in vulnerable jurisdictions shut down their growth plans in the past year to wait for the fallout to blow over.
Now it looks like it has. The bill has been stripped from must-pass legislation and now has to find its way back through a narrowly divided Congress, in which industry lobbyists have more time to educate lawmakers on both sides.
If it were me, I'd say it's dead. Even if it isn't, trust companies have at least a two-year reprieve to chase clients the old way and then worry about how hard to slam the doors.
This is going to be a great marketing season for trust companies and the advisors who work with them. Estate planning always feels more urgent when you can hear a ticking clock.
Taxes probably aren't going up much in the next two years. But after that, who knows? Best to lock in the legitimate assets while you can.
And if you're eager to facilitate in that process while you can, we have room for one or two more Advisor Friendly Trust Companies in the new year. Find out about the program HERE.
From ICIJ:
The Senate has blocked a critical bill to curb financial crime and corruption in the United States, a setback for what advocates have called the most significant reform to the country’s anti-money laundering laws in 20 years.
A bipartisan group of lawmakers introduced the Enablers Act last year citing the Pandora Papers investigation, a collaboration by the International Consortium of Investigative Journalists, the Washington Post and other media organizations.
The Enablers Act would have for the first time required trust companies, lawyers, art dealers and others to investigate clients as well as the source of money and other assets that are moved into the American financial system.
The bill was included earlier this year as part of the National Defense Authorization Act, which is considered a must-pass piece of legislation in Washington D.C. because it allows for timely payment of salaries to U.S. military service members. That version of the defense spending bill won approval from the House of Representatives in July.
Republican Sen. Patrick Toomey, ranking member of the U.S. Senate Banking Committee, was behind the move to strike the bill from the NDAA, according to media reports and interviews with members of Congress and staffers. The banking committee plays an important role in advancing the fuller defense bill to a vote in Congress.
The Pandora Papers investigation showed how U.S. attorneys, registered agents, trust and corporate service providers and real estate agents helped members of the global elite conceal their wealth in tax havens like Wyoming, South Dakota and Delaware.
Unlike banks and other financial institutions, such middlemen are not required to closely scrutinize the source of their clients’ wealth.
“The Enablers Act amendment would undermine fundamental principles of the rule of law and the rights of citizens,” ABA President Deborah Enix-Ross wrote in an October letter to Congress.
The ABA said its opposition to the Enablers Act was determined before Enix-Ross became president and that it “supports reasonable and balanced initiatives to combat money laundering and terrorist financing.”
