On November 5, 2009, Venable partner Kevin Shepherd testified before the Senate Homeland Security and Governmental Affairs Committee during hearings into the Incorporation Transparency and Law Enforcement Assistance Act (s. 569). Shepherd was testifying in his capacity as a member of the ABA’s Task Force on Gatekeeper Regulation and the Profession.
The act is intended to combat money laundering, tax evasion and terrorist financing by, among other things, requiring states to track “beneficial ownership” information and make it available to the federal government, create a new class of financial institutions knows as “formation agents” that would be subject to anti-money laundering statutes, and impose suspicious activity reporting requirements on the legal profession.
Shepherd enumerated the ABA’s objections to the proposed measures on three fronts:
- The Act would essentially federalize state corporation practices;
- The “formation agent” requirement would make attorneys the functional equivalent of banks; and
- The suspicious activity reporting requirements represent a direct conflict with the ethical obligation of attorneys to maintain attorney-client privilege and could undermine the rule of law by dissuading individuals from seeking legal counsel.