On April 28, 2022, the Acting Director of the Financial Crimes Enforcement Network (FinCEN) provided the U.S. House of Representatives Committee on Financial Services an update on a variety of issues including the new U.S. beneficial owner registry.
U.S. Corporate Transparency Act
The U.S. Corporate Transparency Act (“CTA”) was enacted on January 1, 2021. On December 8, 2021, the Financial Crimes Enforcement Network (FinCEN) issued proposed regulations. FinCEN received over 240 public comments on the proposed regulations by the February 6, 2022 deadline. The new reporting regime will require certain domestic and foreign entities to report on their beneficial ownership. According to the Interim Director, the goal of the registry is “to assist law enforcement in unmasking shell companies used to hide illicit activities” and “add valuable context to financial analysis in support of law enforcement and tax investigations."
FinCEN previously announced three stages of rulemaking to implement the CTA:
Implement the beneficial owner information (BOI) reporting requirements.
Implement the CTA’s protocols for access to and disclosure of BOI.
Revise the existing Customer Due Diligence (CDD) Rule.
With respect to the BOI reporting requirements, the Interim Director stated, “the timing of the final rule is not clear yet.” Development of the FinCEN rules implementing the CTA have been impeded by “significant staffing requests that remain unfunded”.
In the meantime, FinCEN is developing a second Notice of Proposed Rulemaking (NPRM) to govern access to BOI by law enforcement, national security agencies, financial institutions, and others specified in the CTAI. FinCEN intends to publish this “Access Rule NPRM” during 2022.
While acknowledging FinCEN must revise the CDD Rule no later than one year after the effective date of the final BOI reporting rule, the Interim Director provided no specifics on timing.
Beneficial Ownership Secure System
Work is progressing on the Beneficial Ownership Secure System (BOSS). The Interim Director referred to BOSS as “the backbone of the beneficial ownership database” and explained “FinCEN has gathered initial requirements and is completing system engineering, architecture, and program planning, and the initial build of the cloud infrastructure and development environments are in progress.”
Until FinCEN issues final regulations, we do not know with certainty the specific requirements. In making his pitch in favor of the FY2023 President’s Budget request for FinCEN of $210.3M, the Interim Director emphasized FinCEN has missed deadlines and will likely continue to do so because of limited resources.