The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is preparing to implement a series of reforms to beneficial ownership reporting requirements designed to crack down on the use of anonymous shell companies for money laundering and other illicit purposes, as mandated by Congress early this year. House Republicans want to ensure that small businesses’ sensitive data remains confidential, among other concerns.
In an April 7, 2021, letter to Treasury Secretary Janet Yellen, Reps. Patrick McHenry of North Carolina and Blaine Luetkemeyer of Missouri insisted that information collected under the new reporting regime be protected “just like an individual’s tax returns,” with disclosure only authorized in select circumstances, such as an investigation by law enforcement or other authorities. The lawmakers also urged FinCEN to comply with new transparency and accountability requirement in the law, which include the head of the agency testifying annually before Congress.
And the implementation of a new beneficial ownership reporting regime, McHenry and Luetkemeyer argued, means FinCEN must rescind the current one first.
“Congress intended only one reporting regime – thus, any new regulation must first rescind the current reporting paradigm before it is replaced with any new provision,” the lawmakers wrote.
McHenry is the ranking Republican on the House Financial Services Committee, while Luetkemeyer is the ranking member of the Subcommittee on Consumer Protection and Financial Institutions.
The changes were included in the National Defense Authorization Act (NDAA), which became law after the House and Senate voted to override a veto by former President Donald Trump.
The NDAA contained the text of the Corporate Transparency Act, which had struggled to find traction in the Senate as a standalone measure, despite passing the House in 2019. Rep. Carolyn Maloney, a New York Democrat and that bill’s sponsor, has called the passage of the reforms as part of the NDAA “long overdue.”
The reforms would require corporations and limited liability companies (LLCs) to provide a list of the entity’s beneficial owners to FinCEN that includes personal information such as full legal name, birth date, and residence, among other requirements. The beneficial ownership information would only be made available to law enforcement, or, with a customer’s consent, financial institutions.
The new regime contains a long list of exemptions meant to limit its scope to the entities most likely to be used for illicit purposes. Banks, broker-dealers, public issuers, insurance companies, nonprofits, public accounting firms, and others are exempt, as are entities with more than 20 full-time employees and $5 million in revenue, and operate in the United States, which are deemed more likely to be real, legitimate businesses.
FinCEN on April 1 issued an Advance Notice of Proposed Rulemaking to solicit comments on questions surrogating the implementation of the beneficial ownership changes. Comments are due by May 5.
This article originally appeared in the April 9, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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