Draft Regulations Mark Progress Toward Eliminating U.S. Anonymous Shell Companies
WASHINGTON, DC – The Financial Accountability and Corporate Transparency (FACT) Coalition is encouraged by the release today of the first set of proposed regulations intended to implement the Corporate Transparency Act (the “CTA”) enacted last January. These proposed regulations would implement the requirement in the CTA that a reporting company submit to the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) a report containing beneficial owner and company applicant information.
“The FACT Coalition warmly welcomes this proposed rule, and we are glad to see Treasury’s FinCEN implementing the plain language of this landmark beneficial ownership disclosure law,” said Ian Gary, Executive Director of the FACT Coalition. “These rules, along with the earlier releases this week of the White House’s Strategy on Countering Corruption and the notice of proposed rulemaking from FinCEN aimed at tackling systemic money laundering vulnerabilities in the U.S. real estate sector are a clear demonstration of an emerging American commitment to tackling global corruption, which corrodes democratic governance both at home and abroad.”
To combat harms posed to the U.S. and global financial system by anonymous entities, the CTA requires corporations, limited liability companies (LLCs), and “other similar entities” to disclose their true, natural owners to a secure directory housed and maintained at FinCEN, and FinCEN is directed under the law to implement the CTA under a series of regulations. Specifically, these proposed regulations address: (1) what entities and which beneficial owners must be reported under the CTA; (2) when this information must be filed; and (3) what information must be provided in connection with filing.
“The law marks the single most significant update to U.S. anti-money laundering laws in twenty years,” said Gary. “That makes rulemaking around the law all the more critical.”
“We look forward to engaging in FinCEN’s rulemaking process to help ensure that an expansive set of reporting entities and an accurate reflection of beneficial owners report under the final rule, including relating to the kinds of U.S. trusts highlighted by the recent Pandora Papers,” said Gary. “As we quickly approach the Summit for Democracy this week, action taken by the White House and FinCEN appropriately recognize that any successful strategy to rooting out global corruption must recognize and address the central role the U.S. plays as a financial secrecy jurisdiction in enabling corruption and illicit financial flows.”
“This draft rule demonstrates a real effort to partner with legitimate businesses to ensure a beneficial ownership directory is a useful tool for law enforcement and helps close down anonymous shell companies, which have been used for corruption and criminal activity for decades,” Gary said. This proposed rulemaking is the first of three expected rulemakings from FinCEN to implement the CTA, as well as certain related amendments to current U.S. anti-money laundering laws enacted in connection with the CTA. Comments on this proposed rulemaking are due on February 7, 2022.
Notes to Editor:
- Click here for the proposed rule.
- Click here for the FACT Coalition’s blueprint to implement the Corporate Transparency Act.
- Click here for the new U.S. anti-corruption strategy.
- Click here for the National Security Study Memorandum.
- Click here for more information and FACT analysis on the U.S. anti-corruption strategy and the notice of proposed rulemaking to root out corruption in the real estate market.
- Click here for more detail on FACT’s response to the Pandora Papers exposé.