On April 27, 2023, 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 implementation of the Corporate Transparency Act’s (CTA’s) beneficial ownership (BO) registry.
Director Das highlighted the following areas on which FinCEN is focused:
Implementing the BO regulatory regime and accompanying database
Protecting the data FinCEN collects
Building a roadmap to enhance the AML/CFT framework
Fostering accountability through enforcement including prioritizing BSA violations identified across the virtual currency industry
FinCEN regulates approximately 290,000 entities with only about 300 full-time employees. A small subset of the 300 employees is specifically dedicated to enforcement and compliance issues. FinCEN has the smallest ratio of employees to regulated entities compared to all the Federal Banking Agencies and Federal Functional Regulators.
U.S. Corporate Transparency Act Update
The CTA was enacted on January 1, 2021. The new reporting regime will require certain domestic and foreign entities to report on their beneficial ownership. FinCEN issued final rules on Beneficial Ownership Information Reporting Requirements and proposed rules on Beneficial Ownership Information Access and Safeguards and Beneficial Ownership Information Collections.
The Acting Director stated the beneficial ownership information collected pursuant to CTA “will allow [FinCEN] to identify the beneficial owners of certain types of companies doing business in the United States, and to protect our national security and our citizens from the many types of illicit activity that have historically hidden behind anonymous shell companies.”
According to the Acting Director, FinCEN is working on:
“Putting in place the rules that govern the beneficial ownership framework – this includes finalizing our proposed access rule, publishing a proposed customer due diligence rule revision, and finalizing the related forms;
Completing the information technology products to administer the beneficial ownership information reporting requirement, including the databases and systems to securely collect, process, store, and provide authorized access to beneficial ownership information;
Conducting outreach to various stakeholders, including the small business community, to inform them of the beneficial ownership information reporting requirements and better understand their questions;
Developing the infrastructure to respond to queries, to be able to conduct audit and oversight, and to provide partner agencies and financial institutions with access to the database; and
Building on the first tranche of guidance materials issued on March 24, 2023, by publishing additional guidance documents and materials, including a Small Entity Compliance Guide, FAQs, infographics, videos, and technical job aids to ensure that the small business community and other reporting companies have the tools they need to comply with the new requirements.”
The effective date for the rule is January 1, 2024. Reporting companies created or registered before January 1, 2024 will have one year (until January 1, 2025) to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days after receiving notice of their creation or registration to file their initial reports.