FinCEN Proposes Beneficial Ownership Reporting Requirements

The FinCEN proposed beneficial ownership reporting requirements to protect U.S financial system from illegal activities. 

The Financial Crimes Enforcement Network (FinCEN) has issued a Notice of Proposed Rulemaking (NPRM) on 7 December to “implement the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA).” 

The stated rule is intended to guard U.S. financial system against illegal conduct and prevent malign actors from exploiting legitimate entities, such as shell companies, to hide the proceeds of fraudulent and illegal acts. The violations that generate due to the lack of regulation undermine the U.S national security, its economic fairness, and the “integrity of the U.S. financial system.”

The proposed rule addresses ‘who’ is obligated to report beneficial ownership information, ‘when’ they are required to report, and ‘what’ information they are compelled to provide. Collecting this information and making it available to law enforcement, financial systems, and other accredited users will impede malign actors’ ability to conceal, move and profit from the proceeds of illegal actions. 

In a statement, the Acting FinCEN Director Himamauli Das said, “FinCEN is 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 proposed rule will be highlighted further at the upcoming Summit for Democracy, demonstrating the Biden Administration’s commitment to reducing corruption and increasing transparency. Additionally, the proposed rule stated, “reflects concerns expressed in the recently released US Government Strategy on Countering Corruption, which discusses money laundering risks posed by anonymous shell companies as well as the necessity to safeguard the international financial system against abuse by corrupt and other illicit actors.” 

The NPRM  is in uniformity with the Financial Action Task Force’s (FATF’s) and G7 and G20 leader’s efforts to limit illegal players’ ability to conceal wealth behind secret shell firms. 

Along with the NPRM, “FinCEN issues an Advance Notice of Proposed Rulemaking on 6th December to solicit public comment on a potential rule addressing the vulnerability of the US real estate market to money laundering and other illegal activity.” The treasury is uniquely positioned to fight corruption at home and abroad by fortifying the US financial system preventing corrupt and other illegal actors from concealing or using their illicit gains in the United States of America (USA). 

Lastly, “FinCEN strongly urges all interested parties to submit written comments from those who would be impacted by the proposed beneficial ownership information reporting rule.” 

Suggested Read: FinCEN Files – Banks abandoning front-line defences against money laundering