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Tougher Money-Laundering Laws Get Backing of Wall Street Lobby

Elizabeth Dexheimer
Tougher Money-Laundering Laws Get Backing of Wall Street Lobby

(Bloomberg) -- Legislation that would toughen money-laundering rules is a priority of Wall Street banks, and lobbyists are busy working to get it passed by Congress even as the rest of Capitol Hill fixates on impeachment and the 2020 elections.

Yet the bill, which the Democratic-controlled House is set to vote on as soon as Tuesday, has also faced formidable foes toiling just as hard to weaken or block it. Opponents have included the National Federation of Independent Business and the American Bar Association.

The legislation would make it harder to use anonymous shell companies to break the law. Big banks favor the bill because they would no longer shoulder the full burden of reporting customer wrongdoing to law enforcement. Opponents say it threatens privacy, would create unnecessary burdens for small businesses and won’t actually do much to stop the bad guys. The Senate could take the measure up this year, though it’s not certain the bill will pass.

“We’re going to continue to lobby,” said Brad Close, head of public policy at the NFIB. “Who would benefit from this bill? It’s clearly big banks.”

The legislation would require companies to tell regulators the names of the owners of shell companies, information the Treasury Department would collect in a private database and law enforcement could use to help catch money launderers, tax evaders and other criminals.

Current rules are lax about requiring people setting up LLCs and other small firms to disclose who will benefit from the profits. Banks are required to report any suspicious activity, which can involve lots of paperwork and legal exposure that the banks would rather share responsibility for.

‘Pain Point’

“It’s a client pain point,” said Greg Baer, president of the Bank Policy Institute. “Clients dislike having their bank bug them every time they open a new account.”

Passage of the bill would be among his members’ biggest priorities in Congress this year, Baer said. Law enforcement groups also favor passage.

Dueling lobbyists have put Republicans and moderate Democrats in a tough spot, forcing them to choose between donors.

The NFIB has spent $1.2 million on lobbying so far this year. That’s on top of $140,000 it’s given this election cycle to Republican lawmakers. The bar association -- whose lawyers have clients that would prefer privacy -- has spent $490,000. Those totals include lobbying on multiple issues because it’s impossible to break down specific targets. Koch Industries, whose chairman and chief executive officer, Charles Koch, is a major Republican patron, has spent more than $7 million on lobbying, including on this bill, according to public records.

Nick Gass, a spokesman for Koch Industries, declined to comment.

Weakening Legislation

All the big Wall Street lobbying groups are in support of the changes, including the BPI, American Bankers Association, Financial Services Forum and Securities Industry and Financial Markets Association. So far this year, BPI has spent $840,000 on lobbying, the Forum $1.3 million and Sifma $2.74 million. Those totals include pushing other issues, too.

Carolyn Maloney, a New York Democrat and a sponsor of the House bill, has been fighting for more than a decade to get the legislation passed. She and other backers say the legislation would provide crucial tools to help law enforcement curb illegal drug sales, human trafficking and other criminal acts.

Maloney’s district includes the Upper East Side of Manhattan, where many financial-industry employees live and work.

Opponents have already made progress in watering down the legislation. For instance, non-profits, including political advocacy groups and political action committees, wouldn’t be included. And the requirements about what information companies need to provide has also been cut significantly.

In the Senate, a group of lawmakers led by Virginia Democrat Mark Warner and Tom Cotton, an Arkansas Republican, introduced similar legislation. The Senate Banking Committee may take up the measure later this year, according to staffers and lobbyists.

That’s if they can convince GOP leadership it’s a vote worth taking while Washington is busy with impeachment and next year’s election.

(Adds response from Koch Industries in 11th paragraph. An earlier version of the story had an incorrect job title for Charles Koch.)

To contact the reporter on this story: Elizabeth Dexheimer in Washington at edexheimer@bloomberg.net

To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net, Bob Ivry

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