Treasury Now Set to Begin Collecting Information on True Owners of Anonymous Companies in January

WASHINGTON, DC – Today, the Financial Accountability and Corporate Transparency (FACT) Coalition welcomes the release by the Treasury Department of the final rule necessary to begin reporting under the landmark Corporate Transparency Act (CTA). The commencement of Treasury’s beneficial ownership reporting regime on January 1, 2024 represents the single biggest leap forward for the U.S. anti-money laundering framework in a generation, and will help to deconstruct systems of financial secrecy that have made the U.S. the world’s top destination for illicit finance.

“Nearly two years after Treasury Secretary Janet Yellen acknowledged the U.S. as perhaps the best place to hide dirty money, we now have the regulations in place to begin to shine a light into the darkest corners of our financial system,” said Ian Gary, executive director of the FACT Coalition. “Uncovering the true owners of anonymous shell entities is the first, and maybe the most consequential, step toward ensuring that corrupt oligarchs, international and domestic criminals, and other bad actors can no longer hide their funds in the U.S. with impunity.”

The final rule released today by Treasury governs access to beneficial ownership information collected under the CTA for authorized users, including state, local, tribal, and trusted foreign partner law enforcement agencies, as well as financial institutions such as banks that will use the information to fulfill existing customer due diligence responsibilities. While FACT’s analysis of the final rule is still ongoing, its release is a fulfillment of one of the most important commitments outlined in the Biden Administration’s 2021 Strategy on Countering Corruption. 

An initial read of the final rule points to vast improvements over a previous draft as to how domestic law enforcement can access beneficial ownership information for use in investigations, as well as to how financial institutions can incorporate beneficial ownership data into their existing due diligence processes.

One additional rule for the CTA, which will reconcile beneficial ownership reporting with existing anti-money laundering obligations for banks and other financial institutions, is expected to be issued next year. Treasury has also yet to clarify whether it will verify information submitted to the database, which is crucial for ensuring the accuracy of the data and its utility for law enforcement and other users. Though today’s rule does not deal directly with the issue of verification, in March the Biden Administration committed to adopting effective verification measures alongside twenty other countries during the Second Summit for Democracy. 

Effective verification measures, however, may be contingent on additional targeted funding. The Financial Crimes Enforcement Network (FinCEN) – the Bureau of the Treasury responsible for developing, implementing, and administering the ownership information database established by the CTA – has been chronically underfunded in recent years, contributing to delays in the rulemaking process. FACT has long advocated for additional funding for FinCEN, particularly given that implementation of the CTA is far from the Bureau’s only major priority. In addition to serving its role as the nation’s primary financial intelligence unit, FinCEN has also been tasked with developing long-overdue anti-money laundering regulations for the $50 trillion real estate and $11 trillion private investment sectors, both of which effectively remain black boxes for investigators.

“While today feels like the end of a long road for the broad coalition of advocates, businesses, and lawmakers that fought to pass and ensure the effective implementation of the Corporate Transparency Act, it must also be the beginning of a new era of financial transparency in the U.S.,” said Tom Cardamone, President & CEO of Global Financial Integrity. “With so many critical fights ahead, from establishing new regulations for real estate and private investment, to addressing the role of professional enablers in international money laundering, we must make sure that Congress and the Administration keep up the momentum for financial transparency. If they do, 2024 might be remembered as the year that the U.S. finally threw off its reputation as a money-laundering haven by becoming a true leader in the global fight against dirty money and corruption.”

###

Notes to the Editor: 

• Click here to read FinCEN’s final rule on Beneficial Ownership Information Access and Safeguards.
• A fact sheet detailing important elements of the final rule can be found here.
• The FACT secretariat team is still reviewing the full text of the final access rule. In February FACT submitted comments on Treasury’s draft access rule, noting that substantial changes and improvements would be required to ensure efficient access to collected beneficial ownership information for authorized users. These changes included:
  • Removing problematic hurdles to directory use by U.S. state, local, and tribal authorities;
  • Ensuring that information submitted to the directory is subject to real-time verification;
  • Clarifying that financial institutions will be able to access collected information pursuant to their entire suite of anti-money laundering and customer due diligence requirements; and,
  • Removing burdensome restrictions on access for trusted foreign partners.
• In September of 2022, Treasury released the first final rule to implement the CTA, which establishes definitions and details reporting requirements for covered entities. Click here to read FACT’s reaction to the first final rule.
• Early this year, FinCEN issued a draft of the form that reporting companies will use to submit required beneficial ownership information under the CTA, known as the Beneficial Ownership Information Reporting form (BOIR). While FACT and other transparency advocates had significant concerns with the draft form, which included fields that would have allowed reporting entities to opt out of providing information required by the statute of the CTA, a recently-released revised form has addressed the bulk of these concerns. FinCEN has indicated that a potential future implementation of the BOIR could leave room for reporting entities to temporarily indicate that they were unable to obtain certain information on a given beneficial owner, while noting that such filings would be considered “incomplete” and out of compliance with the law until said fields are filled. Click here to read FACT’s comment on the revised BOIR form.