updated 2:11 PM CET, Oct 31, 2023

FinCEN issues draft of new beneficial ownership rule 'to counter illicit finance, increase transparency'

The Financial Crimes Enforcement Network (FinCEN) has unveiled a "Notice of Proposed Rulemaking" (NPRM) that it said is aimed at informing stakeholders of its plans to proceed with implementing new beneficial ownership information reporting provisions that are contained in the so-called Corporate Transparency Act (CTA), part of a recent Congressional revision to existing U.S. anti-money laundering laws, which empowers FinCEN to create and manage a national register of beneficial ownership information. 

In a statement, FinCEN said the proposed rule was aimed at "protect[ing] the U.S. financial system from illicit use" and "imped[ing] malign actors from abusing legal entities, like shell companies, to conceal proceeds of corrupt and criminal acts."

Such abuses, it added, "undermine U.S. national security, economic fairness, and the integrity of the U.S. financial system." 

Comments on the new rules will be accepted until Feb. 14, 2022, FinCEN said. 

According to the FinCEN statement, which may be viewed here, the new rule would address, among other things, who must report beneficial ownership information, when they must report, and what information they must provide.

In addition to beneficial owners (i.e., individuals with “substantial control” or a 25% or more ownership interest), the proposed rules would also establish the need to report certain information about the individuals who filed an application to form the legal entity in question, or who were involved in registering it to do business in the U.S.

Collecting this information and providing access to law enforcement, financial institutions, and other authorized users, FinCEN says, "will diminish the ability of malign actors to hide, move, and enjoy the proceeds of illicit activities."

The FinCEN statement quotes acting FinCEN director Himamauli Das as saying that in introducing the new beneficial ownership regulations, FinCEN was "taking aggressive aim at those who would exploit anonymous shell corporations, front companies, and other loopholes to launder the proceeds of crimes, such as corruption, drug and arms trafficking, or terrorist financing."

The U.S. efforts to crack down on shell corporations and require more information about beneficial owners of entities that are legally-domiciled in the U.S. coincide with efforts by other countries to take similar actions, for the same reasons.

Biden administration's 'commitment
to transparency' cited

According to FinCEN, the proposed beneficial ownership rule reflects stated concerns in the Biden administration's avowed commitment to transparency, in addition to being "consistent with the efforts of the Financial Action Task Force and G7 and G20 leaders to curtail the ability of illicit actors to hide wealth behind anonymous shell companies."

The CTA, part of the Anti-Money Laundering Act of 2020, established beneficial ownership information reporting requirements for certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States.

It is described by FinCEN as representing "the culmination of years of bipartisan efforts by Congress, the Treasury, national security agencies, law enforcement, and other stakeholders to bolster the United States’ corporate transparency framework." 

To see a "Fact Sheet" on the proposed Beneficial Ownership Information Reporting Notice of Proposed Rulemaking, click here.