Rob Farling is national leader of the anti-money laundering and regulatory compliance unit of RSM US, an audit and consulting firm.

Banking and compliance experts tend to agree with regulators that the year-old beneficial ownership rules are helping to enhance financial transparency, but that Congress still needs to do more to help banks make it work. One key need: The collection of information.

That view emerged this week from testimony before a hearing of the U.S. Senate Committee on Banking, Housing and Urban Affairs. The awareness of various challenges, including getting information to verify ownership, also arose from a recently released survey of more than 200 commercial banks and credit unions by RSM US LLP, an audit and consulting firm.

Rob Farling, national leader of anti-money laundering and regulatory compliance at RSM, told Corporate Counsel that the high level of confidence expressed by respondents was a highlight of the survey findings.

The survey shows about 88% of commercial banks and credit unions are confident in their compliance with the new beneficial ownership rules, and 91% are confident in their overall compliance with the final customer due diligence rule. The Financial Crimes Enforcement Network enacted the new rules a year ago in May as part of its U.S. Bank Secrecy Act guidelines.

But the new requirements presented several challenges for general counsel and compliance officers at banks and credit unions, including confusion about guidance, training and technology concerns.

“What really surprised me,” Farling said, “was the amount of focus on the training of frontline staff. I've been in the business a long time, and I thought the focus would be on technology, or the system or the policies, but they [respondents] said no, it's the training.”

He explained part of that had to do with the difficulty of “digging down to the actual beneficial owner. How many levels do you have to do to identify a controlling party? There's a lot of oversight to achieve that.”

The testimony of three government officials at the May 21 Senate hearing also stressed several challenges, including the high cost of starting and maintaining an effective system. But one of the top items of concern was verification of information about ownership.

FinCEN director Kenneth Blanco urged Congress to require the collection of beneficial ownership information at the time when a legal entity is formed under state law. Currently some states collect little or no information on owners of new corporations.

Blanco spoke in dramatic testimony that cited a Russian arms dealer called “The Merchant of Death” who sold weapons to terrorists to kill Americans, a billion-dollar Ponzi scheme, a nationwide criminal network to distribute oxycodone, and a Venezuelan treasurer who accepted over $1 billion in bribes. Very different crimes, Blanco noted, but each used shell corporations to hide their money.

That's why, he said, collecting beneficial ownership information at the time a corporation is formed is “critical for the security of our nation and its citizens.”

Of three witnesses at the hearing, all called for a mechanism of collecting the data. Besides Blanco, FBI Crimes Section Chief Steven D'Antuono advocated for the creation of federal- and state-level systems that could collect and store beneficial ownership information. Such a system would help law enforcement identify illicit financing activity sooner, he said.

D'Antuono urged the senators to consider collection regimes that are in effect now in Europe and Great Britain.

Grovetta Gardineer, senior deputy comptroller at the U.S. Office of the Comptroller of the Currency, advised Congress to establish a standardized approach for beneficial ownership data that would help law enforcement agencies, regulators and banks by giving them a resource against which they can verify ownership.

“The OCC supports legislation to create a consistent, nationwide requirement for legal entities to provide, update and verify accurate beneficial ownership information, or alternatively, the creation of a centralized database to maintain this information,” Gardineer testified. “The requirement to provide this information should apply to all domestic legal entities and to legal entities incorporated in foreign jurisdictions as a condition to having a bank account in the United States.”

In addition, the American Banking Association this week wrote to Senate committee members calling for the establishment of a federal registry of beneficial ownership information that banks could use to help with compliance.

“Establishing such a registry would help rectify a flaw in the rule by providing a mechanism through which beneficial ownership information provided by customers could be verified,” the group said. It added a registry would also help companies “because the beneficial ownership information would be located in one place. A company would not be required to provide that information to a financial institution each and every time it opens a new account.”