First let me say this…IT’S NOT PERSONAL.
“AML” is anti-money-laundering-plus. All financial institutions are required to check customers to reasonably ensure they aren’t associated with lists and registries relating to financial crimes and terrorism. This happens every time you open a credit card account, a Paypal account, apply for a home loan (or any kind of loan), open a brokerage account, and every time you buy or sell securities (stocks, bonds, etc). Plus those firms are required to periodically compare customer files to updates from government lists.
This protects the financial system. And in the case of crowdfunding it also protects issuers and portals.
How so? Imagine if an issuer took on an investor who is a known terrorist. Or who is a known financial criminal. But they didn’t check. And somehow it comes up (either through an audit, a news report, or whatever). Securities regulators, the FBI, the Treasury and others may then assume the company is at the least aiding and abetting, and at the worst helping facilitate activities. To disprove this will suck up massive amounts of your executive’s time and massive amounts of funds for lawyers and accountants to defend the company and work with investigators. Computers and equipment might be seized. Bank accounts might be frozen. Executives and investors might be placed on no-fly and other lists. Customers and vendors may be targeted. News reports could break about the investigations. All because the company didn’t want to spend $2.
This is serious stuff, and not to be taken lightly. According to KPMG, “AML has never been higher on senior management’s agenda, with regulatory fines now running into billions of dollars, regulatory action becoming genuinely license threatening, and threats of criminal prosecution against individuals.”
FundAmerica ties into the LexisNexis databases (standard in the legal and financial industry) to run AML reports which pull data from US Treasury databases (OFAC, FinCEN, etc), Homeland Security databases, IRS databases (to check for tax id fraud, including deceased persons), and databases related to the person’s name (for aliases) and addresses. We do all this for two dollars ($2.00).
Questions? Forward this to your securities attorney and see what they say. The risks are real, and certainly not worth taking to avoid a $2 charge.
These materials are my personal opinions and for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professionals to obtain advice with respect to any particular issue or problem.