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Family offices say disclosure scheme invites theft, kidnapping

(Bloomberg) — A proposal by the U.S. Treasury Department to require some corporations to disclose the identities of their beneficial shareholders is facing opposition from family offices.

Ultra-wealthy families or individuals are “uniquely susceptible” to crimes such as theft, fraud, extortion and kidnapping, according to the Private Investor Coalition, a group that advocates for single-family offices in Washington.

Disclosing personal identifiers such as names and residential addresses, as the new rule would require, could put these families at risk for whom privacy considerations are “paramount,” the group said in a February. 1 letter to the Federal Register submitted during the comment period.

Even though shareholder information will be kept in a government database that is not viewable to the public, the Private Investor Coalition argues that the risk remains.

“When sensitive data is stored in one place, the occurrence of a data breach is more a matter of ‘when’ than ‘if’,” the group said in the letter.

companies by name

The proposal by the Treasury’s Financial Intelligence Unit would implement part of last year’s Corporate Transparency Act and aims to combat money laundering, fraud and other crimes that are often facilitated by opaque shell companies.

Under the rule, beneficial owners of foreign and domestic corporations, LLCs and other entities must disclose their name, date of birth, address to the authorities and share a scanned copy of an identification document such as a driving license. Certain categories of companies that already have to share this information are exempted.

Many countries already disclose companies to beneficial owners and some, such as the UK, make the information public. Evidence suggests the rule poses no threat of kidnapping or extortion, said Ryan Gurley, policy director for Fact Coalition, a Washington advocacy group.

“We work closely with law enforcement and they are strong supporters of this law as an incredibly important tool to eliminate tax evasion, corruption and other activities,” Gurley said.

arcgos capital

Lawmakers and regulators have revered family offices in the wake of the impact last year of Archegos Capital Management, the family office of former hedge fund manager Bill Hwang. Family offices are not required to register as investment advisors or disclose holdings because they only manage funds for family members and not external clients.

According to Bill Woodson, head of strategic wealth advisory at SVB Financial Group company Boston Pvt, the proposed Treasury rules and other discussed regulatory measures position family offices, whose beneficiaries and administrators, as aggressive and unnecessary. lets see.

For example, much of the information sought in the new rule must already be disclosed by family offices through the compliance requirements of various financial intermediaries, he said.

“The consistent thematic response from the family office industry is largely, ‘You don’t understand us,'” Woodson said.

– With assistance from Ben Steverman.

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