Following the enactment of the Anti-Money Laundering Act of 2020 (AMLA), which encompasses the Corporate Transparency Act (CTA), the Financial Crimes Enforcement Network (FinCEN) published an Advance Notice of Proposed Rulemaking (ANPR) on April 5, 2021, to implement Section 6403 of the CTA, relating to beneficial ownership reporting. In the ANPR, FinCEN solicits comment within 30 days on 48 questions that cover, among other topics, reporting requirements, the beneficial ownership registry, and disclosure of beneficial ownership information (BOI) to third parties. Our Client Alert on the AMLA is available here.
The Bank Secrecy Act was amended by the CTA as a means to inhibit the use of U.S.-based shell corporations for illicit financial activity. The CTA requires certain companies that are formed or registered to do business in the U.S. to report BOI to FinCEN upon the company's formation or registration under state or tribal law.1 FinCEN will maintain this BOI in a registry, and will be permitted to disclose the BOI in specific circumstances to limited parties and subject to certain conditions.
The ANPR questions are organized into five categories, outlined below. For each category, we include a selection of some of the key questions raised by FinCEN.
- Are certain CTA definitions, such as those of "beneficial owner," "reporting company," or "applicant," sufficiently clear?
- Should specific terms used within the CTA definitions themselves be defined?
- BOI Reporting
- What information should be required of reporting companies? For example, FinCEN asks whether reporting companies should be required to report details of their corporate affiliates, subsidiaries, and parent companies, or information on the nature of the reporting company's relationship to its beneficial owners. FinCEN emphasizes that the goal is to collect information that will be highly useful to authorized users of the BOI, such as law enforcement agencies, national security and intelligence agencies, and federal functional regulators.
- Should FinCEN offer electronic or batch filing and how should it handle certifications from foreign exempt companies?
- What are the anticipated burdens associated with reporting requirements?
- How can FinCEN ensure accurate and complete reporting, delineate safe harbors, and handle changes in BOI?
- FinCEN Identifier2
- Under what circumstances should FinCEN issue a FinCEN identifier, and what should be the associated process?
- Security and Use of BOI and Applicant Information
- How should FinCEN authenticate legitimate requests for BOI, and what security and confidentiality measures should be put into place to protect BOI and applicant information?
- What is a useful way to make BOI available to financial institutions, and how might FinCEN streamline the BOI request process for financial institutions?
- Should financial institutions be permitted to use BOI for customer identification purposes?
- How should FinCEN notify authorized users, if at all, when information contained in a prior request has been updated?
- Cost, Process, Outreach, and Partnership
- How can FinCEN minimize costs to small businesses, and are there other business constituencies requiring special attention?
- What burdens might CTA requirements impose on governmental agencies, and how can FinCEN best work with these agencies to further CTA goals?
- How can FinCEN best engage other stakeholders that may be concerned about the larger ramifications of the CTA, unrelated to anti-money laundering and counter-terrorism financing purposes?
Comments are due by May 5, 2021, and the rule must be promulgated by January 1, 2022. Additional AMLA-related rulemakings from FinCEN will be forthcoming, including on the Customer Due Diligence Rule.
1. Within two years of the date that final regulations are issued, existing companies must submit BOI to FinCEN or certify to FinCEN, in accordance with specific procedures, that the company is exempt.
2. In addition to a name, date of birth, and address, a reporting company must submit a unique identifying number for beneficial owners. In lieu of using a passport or driver's license number, a reporting company may request a FinCEN identifier for the beneficial owner.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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