Unprecedented Fields May Render The Corporate Transparency Act’s Reporting Regime Optional

Washington, D.C. – The Financial Accountability and Corporate Transparency (FACT) Coalition today submitted comments with 15 organizations calling on the Treasury Department to substantially amend a draft form that LLCs, corporations, and other entities operating in the U.S. will use to report their true, “beneficial” owners under the Corporate Transparency Act (CTA). FACT’s comment specifically called for the removal of fields within the form that allow reporting entities to claim that they are “unable to obtain” certain information statutorily required by the CTA, or that such information is “unknown”, rendering reporting effectively optional under the law.

“The intent and letter of the CTA is clear: there’s no halfway with reporting under this law,” said Erica Hanichak, government affairs director at the FACT Coalition. “Covered entities, by law, are required to provide accurate, complete information on their true owners to a secure directory at Treasury. That’s why this proposed form is so baffling. For Treasury to introduce what is effectively an optional reporting regime has no basis in the text of the CTA and flies in the face of congressional intent. If Treasury doesn’t remove these fields and flip the script, it risks undermining the efficacy of the law as a whole.”

The proposed form specifically allows reporting entities to report “unable to obtain” or “unknown” with respect to most relevant details regarding a given beneficial owner’s identity, and other crucial information – including whether the company is even able to identify its beneficial owners in the first place. Additionally, the form does not include an important field that FinCEN had previously indicated would be required: a certification that a given reporting entity has submitted “true, correct, and complete” information. 

“It is shocking that something as simple as an information intake form may, if left in its current state, sink a landmark anti-corruption achievement more than a decade in the making,” said Zoe Reiter, Director of Strategic Initiatives and Partnerships at Project On Government Oversight. “Introducing unprecedented optionality to beneficial ownership reporting, especially at this late stage of the implementation process, represents an unforced error of staggering proportions. Treasury must reverse course now in order to fully and faithfully implement the CTA in time for reporting to begin on January 1, 2024.”

Last month, FACT expressed major concerns with Treasury’s draft second rule to implement the CTA, which imposes burdensome, unpractical restrictions on access to collected beneficial ownership information for state, local, tribal, and foreign partner authorities and other authorized users. These concerns, among others, were echoed last week in a letter authored by a bipartisan group of Senators, arguing that the proposed rule “strays from congressional intent…” and “risk(s) undermining the utility of the beneficial ownership directory.”

“We’re coming down to the eleventh hour for Treasury to honor the intent of Congress, as well as the efforts of countless civil society, law enforcement, and international advocates that worked tirelessly to make the CTA law,” said Ian Gary, executive director of the FACT Coalition. “The importance of this implementation process isn’t just about the fate of one law. Beneficial ownership transparency is central to the Biden Administration’s broader strategy to counter illicit finance and corruption. Recognizing that, Treasury needs to act now to ensure that the CTA ultimately does what it was designed to do – end the use of anonymous shell entities in the U.S. by bad actors to hide their identities and funds. The devil, as always, is in the details here. It’s time for Treasury to get this done right.”

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Notes to the Editor: 

• Click here to read FACT’s full comment to Treasury, endorsed by 15 anti-corruption, human rights, anti-human trafficking, and housing groups.
• Click here to view FinCEN’s proposed form to collect beneficial ownership information from reporting entities.
• Click here to read last week’s letter to FinCEN by Senators Chuck Grassley (R-IA), Rubio (R-FL), Elizabeth Warren (D-MA), Sheldon Whitehouse (D-RI), and Ron Wyden (D-OR) calling for improvements to Treasury’s implementation of the Corporate Transparency Act
• Click here for FACT’s full comment letter to FinCEN on the draft second rule to implement the Corporate Transparency Act.