FinCEN Issues Proposed Rule for Beneficial Ownership Reporting to Counter Illicit Finance and Increase Transparency
December 07, 2021
WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) today issued a Notice of Proposed Rulemaking (NPRM) to implement the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA). The proposed rule is designed to protect the U.S. financial system from illicit use and impede malign actors from abusing legal entities, like shell companies, to conceal proceeds of corrupt and criminal acts. Such abuses undermine U.S. national security, economic fairness, and the integrity of the U.S. financial system.
The proposed rule addresses, among other things, who must report beneficial ownership information, when they must report, and what information they must provide. Collecting this information and providing access to law enforcement, financial institutions, and other authorized users will diminish the ability of malign actors to hide, move, and enjoy the proceeds of illicit activities.
“FinCEN is taking aggressive aim at those who would exploit anonymous shell corporations, front companies, and other loopholes to launder the proceeds of crimes, such as corruption, drug and arms trafficking, or terrorist financing,” said Acting FinCEN Director Himamauli Das.
Reflecting the Biden Administration’s commitment to curbing corruption and increasing transparency, the proposed rule will be further highlighted at the forthcoming Summit for Democracy. The proposed rule also reflects stated concerns in the newly released U.S. Government Strategy on Countering Corruption, which addresses the money laundering risks posed by anonymous shell companies as well as the need to protect the international financial system from abuse by corrupt and other illicit actors. It is also consistent with the efforts of the Financial Action Task Force and G7 and G20 leaders to curtail the ability of illicit actors to hide wealth behind anonymous shell companies.
The CTA, part of the Anti-Money Laundering Act of 2020, established beneficial ownership information reporting requirements for certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States. The proposed rule implements these reporting requirements and reflects FinCEN’s careful consideration of public comments received in response to its April 5, 2021, Advance Notice of Proposed Rulemaking on the same topic. The proposed rule represents the culmination of years of bipartisan efforts by Congress, the Treasury, national security agencies, law enforcement, and other stakeholders to bolster the United States’ corporate transparency framework. FinCEN is committed to implementing these statutory obligations in a robust manner while minimizing burdens on reporting companies.
As part of a whole-of-government commitment to democracy, Treasury is taking a number of actions to fight corruption and prevent it from undermining trust in democratic institutions. In addition to this NPRM, on December 6, FinCEN announced an Advance Notice of Proposed Rulemaking to solicit public comment on a potential rule to address the vulnerability of the U.S. real estate market to money laundering and other illicit activity. Treasury is uniquely equipped to combat corruption at home and abroad by strengthening the U.S. financial system to prevent corrupt and other illicit actors from hiding or using their illicit proceeds in the United States.
FinCEN strongly encourages all interested parties, including those that would be affected by the proposed beneficial ownership information reporting rule, to submit written comments.
Delaware Business Incorporators, Inc. will be providing more information as it becomes available from the U.S. Treasury. The U.S. Treasury FinCEN is still in the rulemaking phase. In the coming months, the U.S. Treasury will be releasing additional guidelines and online forms for companies to comply with these new beneficial ownership requirements.