updated 2:28 PM CEST, May 24, 2023

Ahead of new beneficial ownership regs, FinCEN seeks public comment by May 5

FinCEN, the U.S. Treasury Department bureau that's best known to many American expats for its role in receiving Foreign Bank Account Reports from them each year, is seeking public comment on proposed measures it's considering introducing, as part of an overall U.S. strategy of requiring significantly  greater reporting of beneficial ownership information.

The announcement came on Thursday (April 1), in the form of a notice currently available on its website, which was also distributed to the financial services industry; a detailed listing of the elements FinCEN is seeking comment on may be found on the Federal Register's website by clicking here (and scrolling down).  The deadline for comments is May 5.

Beneficial owners are typically defined as "the individual natural persons who ultimately own or control" the entities in question, which are typically corporations.

According to the notice, the request for comment on the part of FinCEN (Financial Crimes Enforcement Network) – which exists to combat domestic and international money laundering, terrorist financing and so on) – is part of a larger program of new regulations it is undertaking to introduce as it seeks to implement the so-called Corporate Transparency Act (CTA), which itself was included in a bill known as the Anti-Money Laundering Act of 2020 (AML Act). 

As reported,Carolyn Maloney 2019 lower res the Corporate Transparency Act, which had been sponsored by Democratic New York City Congresswoman Carolyn Maloney, pictured left, was thought to have come as a surprise to some observers, who never thought the U.S. would ever agree to a beneficial ownership register, which is where some people see the AML Act heading.

She first introduced legislation aimed at combating anonymous shell companies in 2009, according to a posting on her website, and then "introduced a version of the bill in every subsequent Congress." She unveiled what was to be the final version, by this time known as the CTA, on May 3, 2019, ahead of its subsequent progress  over the next 18 months through the House of Representatives and Senate.

Meanwhile, even as opposition to beneficial ownership registers around the world has been mounting in some circles – on grounds that they put the personal details of the individuals whose names appear on them at risk of being stolen or otherwise illegally made use of – governments have also been introducing them more and more in recent years, in response to mounting pressure on them to avoid ending up on “tax haven blacklists”.

Among the groups that have brought pressure to bear on U.S. as well as foreign lawmakers over the role undisclosed beneficial ownership has played in facilitating money-laundering, terrorism financing, and other illicit activities has been the Financial Action Task Force (FATF), an intergovernmental organization founded in 1989 under the auspices of the G7.  

Thus it was that against this backdrop the AML Act became law in January, and in the process, some observers said at the time, set the stage for what have been called the most significant amendments to existing U.S. anti-money laundering regulations in years.

'Bank Secrecy Act amendments'

Among its provisions, the CTA amends the Bank Secrecy Act – the 1970 legislation that also created FBARs – to require corporations, limited liability companies, and similar entities to report certain information about their beneficial owners.

According to the FinCEN notice, this new reporting requirement "will enhance the national security of the United States by making it more difficult for malign actors to exploit opaque legal structures to launder money, finance terrorism, proliferate weapons of mass destruction, traffic humans and drugs, and commit serious tax fraud and other crimes that harm the American people."

Areas about which public comment is being sought include how those entities required to disclose their beneficial ownership should be defined, in order to eliminate potential ambiguities, uncertainties and coverage gaps; what the scope of reporting on an entity's affiliates and/or subsidiaries should be, and how the nature of the relationships between each beneficial owner and the applicable company should be defined; how the accuracy of beneficial ownership information is to be ensured; what "reporting companies" or individuals "holding FinCEN identifiers" be required to do to satisfy requirements that they "update in a timely manner the information they have submitted when it changes, such as when beneficial owners or holders of FinCEN identifiers transfer substantial control to other individuals", and so on.