Corporate Transparency Act Reporting Rules Finalized, But Will Access Issues Cause Delay?
As of this writing (June 15, 2023), the Corporate Transparency Act (CTA)[1] is scheduled to take effect on January 1, 2024. An earlier article[2] raised several questions in anticipation of rules to be issued by Treasury’s Financial Crimes Enforcement Network (FinCEN) implementing the CTA’s beneficial owner information (BOI) reporting requirements. Final reporting rules[3] issued on September 30, 2022, answered most of those questions, as discussed below.
On December 16, 2022, FinCEN released proposed rules for access to the beneficial ownership database (BOI Database) and security issues.[4] On February 14, 2023, the last day for comments, the American Bankers Association and 51 state bankers’ associations jointly filed a highly critical comment asserting that the proposed rules were fatally flawed and should be withdrawn.[5] The overall tone of the comment suggests a serious communication failure between FinCEN and the banking lobby, which previously had been thought to be working closely with FinCEN in developing the CTA rules. The issues raised by the comment include:
1) Banks would not be allowed to seek open-ended or multiple reporting company search results from the BOI Database and would have to make separate requests for each reporting company, with the reporting company’s consent.
2) Banks would be allowed to use BOI from the BOI Database only to facilitate compliance with customer due diligence requirements (CDD Rules)[6] under the Bank Secrecy Act (BSA),[7] and not for other purposes such as compliance with Office of Foreign Assets Control sanctions. A bank would have to identify and wall off BOI obtained from the BOI Database from that otherwise collected by the bank to avoid inadvertent violation of the CTA’s data security requirements.
3) Banks would not be allowed to share BOI obtained from the BOI Database with their personnel located outside the U.S., with independent auditors, nor with third-party service providers supporting compliance.
4) Since BOI obtained from the BOI Database may differ from BOI obtained directly from customers, a bank should have a safe harbor from liability for any discrepancies when bank regulators examine the bank’s use of BOI from the BOI Database.
5) The access rules should state explicitly that banks are not required to access the BOI Database.
On March 16, 2022, Senators Whitehouse, D-RI, Grassley, R-IA, Wyden, D-OR, Rubio, R-FL, and Warren, D-MA, sent a letter[8] to FinCEN supporting most of the banking industry’s positions other than sharing BOI with foreign personnel and the safe harbor from liability. The letter suggested an automated process for receiving and responding to BOI requests from banks, asserting that manual review of individual requests would overwhelm FinCEN’s resources.
The letter also criticized proposed Rule §1010.955(b)(2),[9] requiring a state, local, or tribal law enforcement agency to obtain a specific court order authorizing the agency to seek BOI in a criminal or civil investigation. The senators argued that the CTA requires only that “a court of competent jurisdiction, including any officer of such a court [emphasis added], has authorized the law enforcement agency to seek the information in a criminal or civil investigation”[10] and cited legislative history to contend that even a court clerk could authorize the request.[11]
The letter did not refer to the disclosure requirements for foreign law enforcement.[12] The proposed rules for disclosure to foreign law enforcement track the statute,[13] but do not clarify the phrase “trusted foreign country.”[14] The statutory limitations requiring compliance with a treaty or limiting the use of the information[15] are not included in the proposed rules. Interestingly, the use of BOI received by a foreign party is less restricted than BOI disclosed to domestic parties.[16]
The proposed rules do not impose any meaningful restriction on disclosure to federal agencies engaged in national security, intelligence, and civil or criminal law enforcement, or to the Department of the Treasury in connection with its duties, including tax administration.[17] Disclosure to bank regulatory agencies is limited and requires a prior security agreement with FinCEN.[18]
The senators’ letter also commented at length on an issue that drew other critical comments, that of verification of the information in the submitted BOI Reports. As discussed further below, the final reporting rule requires the reporting company to certify that the information in the report is true, accurate, and complete. FinCEN notes that its definition of verification consists of “confirming that the reported BOI submitted to FinCEN is actually associated with a particular individual” and notes that it continues to review verification options within the legal constraints in the CTA.[19]
The CTA does not require independent verification of BOI, only that the secretary of the Treasury, in promulgating the rules, must “to the extent practicable [emphasis added] …ensure the beneficial ownership information reported to FinCEN is accurate, complete, and highly useful.”[20] Sections 6502(b)(1)(C) and (D) of the Anti-Money Laundering Act of 2020 (AML)[21] require the secretary, in consultation with the attorney general, to conduct a study no later than two years after the effective date of the CTA’s final reporting rule to evaluate the costs associated with imposing any new verification requirements on FinCEN, as well as the resources necessary to implement any changes. The current CDD rules do not impose a greater verification requirement on banks, only that they verify that beneficial owners are actual persons.[22]
The senators’ letter[23] suggested that FinCEN should verify the accuracy of BOI received through an automated process that checks the identity and status of a beneficial owner using “reliable, independently sourced/obtained documents, data or information,” citing Financial Action Task Force (FATF) International Standards.[24] A comment filed by Transparency International U.S.[25] suggested that FinCEN should electronically check reported names and passport numbers through the U.S. Department of State, check state drivers’ licenses and identification numbers through the National Law Enforcement Telecommunications System, and check addresses through the U.S. Postal Service to achieve a “minimal level of assurance that the reported information is accurate and reliable.”[26] The comment also notes that the United Kingdom, after “high-profile reports of clearly bogus entries” in its initial persons with significant control (public) database,[27] is now verifying the beneficial owner information it receives, to some extent,[28] relying in part on “authorized corporate service providers” such as accountants, attorneys and company formation agents, who (in the U.K.) “have an existing obligation to carry out customer due diligence checks on all of their clients.”[29]
But it seems that the ultimate objective of the transparency advocates is some degree of actual auditing of reporting companies to verify that the reported BOI reflects actual ownership and control. On March 29, 2023, the U.S. committed at the Summit for Democracy Commitment on Beneficial Ownership and Misuse of Legal Persons that it would “effectively implement the revised Financial Action Task Force (FATF) standard on transparency and beneficial ownership of legal persons.”[30] Those standards contemplate some degree of governmental-level auditing of entities to verify BOI.[31]
But criticism from other sources favored FinCEN’s strict approach. On March 8, 2023, Treasury Acting Inspector General Richard K. Delmar testified to the House Financial Services Committee, Subcommittee on Oversight and Investigations, about ongoing audits by Treasury’s Office of Inspector General (OIG) of FinCEN’s management of the BSA database. Among other criticisms, the OIG found that FinCEN did not adequately monitor the more than 500 federal, state, and local law enforcement agencies that have access to that database to ensure that they “use the information for the intended purpose, monitor for anomalous queries or disable expired login credentials in a timely manner.”[32] FinCEN Acting Director Himamauli Das, in an appearance before the House Financial Services Committee on April 27, 2023, assured the committee that FinCEN was actively working to address the concerns voiced by the OIG to protect “sensitive information” in context of the BSA and the pending CTA database.[33] The FinCEN Fact Sheet released with the proposed access rules noted that “(t)he beneficial ownership IT system will be cloud-based and will meet the highest Federal Information Security Management Act (FISMA) level” — FISMA High.[34]
Another possible explanation of the strictness of FinCEN’s proposed access rules is that, in 2018, a FinCEN employee leaked thousands of Suspicious Activity Reports (SARS) to a journalist. The employee pleaded guilty and was sentenced to six months in prison.[35] The International Consortium of Investigative Journalists and BuzzFeed News subsequently published an investigative series, “FINCEN FILES” in September 2020, that may have been a catalyst for passage of the CTA.[36]
Other criticism of FinCEN has come from Congressman Patrick McHenry, R-NC, chair of the House Financial Services Committee, and Congressman Blaine Luetkemeyer, R-MO, chair of the Subcommittee on National Security, Illicit Finance, and International Financial Institutions. In a letter to Treasury dated April 7, 2021, they urged protecting small business BOI as well or better than tax return information and emphasized the access restrictions in the CTA.[37]
Final Reporting Rules Answer Some Questions Raised in Prior Article
As noted above, an earlier article raised several questions about how the anticipated rules would implement the CTA’s beneficial owner information (BOI) reporting requirements. The final reporting rules provided some answers:
• General Partnerships and Non-business Trusts Are Not Reporting Companies — Section 1010.380(1)(i) of the final reporting rule defines a domestic reporting company as a corporation, limited liability company or (any entity that is) “(c)reated by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.” The fact sheet released by FinCEN with the final rules [38] states that:
FinCEN expects that these definitions mean that reporting companies will include (subject to the applicability of specific exemptions) limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships, in addition to corporations and LLCs, because such entities are generally created by a filing with a secretary of state or similar office.
While non-business trusts and general partnerships are not defined as reporting companies, it should be noted that ownership information may need to be revealed if a trust or general partnership is involved in the ownership of a reporting company.[39]
• A Foreign Entity Merely Owning U.S. Real Estate Is Not a Reporting Company — The final rules classify a foreign entity as a reporting company only if registered to do business under state law.[40] FinCEN did not address the issue of a foreign company not registered to do business in a state despite being required to do so by applicable state law, but it did acknowledge that foreign entities whose activities in a state do not require state registration are not reporting companies.[41]
• “Applicant” Definition Narrowed — The final rules greatly reduce the number of “applicants” to be identified in CTA filings, relieving law firms and corporate formation companies of a potentially overwhelming burden. Only reporting companies formed or registered after December 31, 2023, will be required to identify applicants and updating of applicant information will not be required.[42] The definition of an applicant is now limited to at most two individuals — the individual who directly files the company formation or registration documents, and the individual who is “primarily responsible” for directing or controlling the filing.[43]
• Substantial Control — While ignoring substantial criticism of its draft definition of the statutory term “substantial control,” and deliberately declining suggestions that it follow the definitional approach of the existing CDD rules,[44] FinCEN did make some tweaks to the proposed rules concerning substantial control.[45] The definition of “senior officer” now excludes corporate secretaries and treasurers, although the general counsel role remains a senior officer position.[46] Titles are not dispositive.[47]
The issue of authority over appointment of officers and directors was modified by deleting the proposed rules’ concept of authority to appoint a “dominant minority,” and the issue of “direction, determination, or decision of, or substantial influence over, important matters affecting the reporting company” was addressed by changing “important matters affecting” to “important decisions made by” the reporting company.[48] The catchall “any other form of substantial control” remains.[49] Also, FinCEN added new language, “including as a trustee of a trust or similar arrangement” to the definition of direct or indirect exercise of substantial control.[50]
Interestingly, while claiming its motivation was to remove a redundancy, FinCEN deleted the final sentence of proposed Rule §1010.380(d)(2), stating that an individual who has the right or ability to exercise substantial control…shall be deemed to exercise such substantial control.” The commentary accompanying the final rules acknowledged criticisms.[51]
FinCEN provided only two examples in the commentary to illustrate substantial control.[52] More examples were provided in a March 24, 2023, FinCEN release, Beneficial Ownership Information Reporting Frequently Asked Questions,[53] including one in which four officers are deemed beneficial owners.
• Ownership Interests — FinCEN made several modifications to proposed Rule §1010.380(d)(2) regarding how an individual may directly or indirectly control an ownership interest.[54] But notably, no changes were made to former subsection (d)(3)(ii)(C)[55] regarding trusts, despite substantial criticism that the proposed rule could result in several parties being considered as owning the ownership interests held in a trust. FinCEN even added language to proposed Rule §1010.380(d)(1)(ii) to emphasize that a trustee can exercise substantial control directly or indirectly.
In response to comments asking for examples of how total ownership interests were to be calculated, FinCEN revised proposed Rule §1010.380(d)(iii) to provide some guidance, notably adding a “vote or value” approach for corporate stock. FinCEN also added new subsection (D), providing that if the facts and circumstances do not permit the calculations described in revised subsections (B) or (C) to be performed with reasonable certainty, then any individual who owns 25% or more of any class or type of ownership is to be deemed a beneficial owner of the reporting company. Little change was made to the exceptions to the beneficial owner definition.[56]
Other Issues Addressed in Final Reporting Rules
• Address Provisions — The final reporting rules made changes regarding the address to be provided in the BOI report. For a reporting company with its principal place of business in the U.S., the street address of that principal place of business must be used; in all other cases the street address of the primary location in the U.S. where the reporting company conducts business is to be used.[57] A third-party address or P.O. box address is not allowed. But this presumes that there is a street address available, and FInCEN acknowledges that there may be a need for additional guidance on this issue.[58]
Changes also were made to the address requirements for beneficial owners and applicants, including dropping the “tax residency” concept that drew a number of adverse comments.[59] For an applicant who filed the creation or registration document in the course of the individual’s business, the business street address should be used; in all other cases (including a beneficial owner) the residential street address (which need not be in the U.S.) is to be used.[60] FinCEN acknowledged that there may be particular cases where disclosing an address is problematic, and will consider those circumstances on a case-by-case basis.[61]
• Documentation — FinCEN amended the proposed rule for identification documentation to be provided by beneficial owners and applicants by requiring that the reporting company specify the jurisdiction that issued the identification document with the unique identifying number of the beneficial owner or applicant.[62] But FinCEN barely mentioned, and did not attempt to resolve, the possibility that a foreign beneficial owner may not have a passport, for a foreign person likely the only acceptable documentation available.[63] For a newly formed company trying to meet the 30-day reporting deadline, a foreign beneficial owner may not be able to obtain a passport in time.
On the other hand, there is no apparent requirement that the identification document be issued by a foreign beneficial owner’s country of primary residence. A foreign person with more than one passport (even one obtained through a “citizenship by investment program”) and a residential address in the issuing jurisdiction might use the alternate passport to avoid association with his or her country of primary residence.
Although discussing at length[64] why the reporting company should provide an image of the identification document from which the individual’s unique identifying number is obtained, FinCEN then removed from proposed Rule §1010.380(b)(1)(ii)(E) the requirement that the image include the unique identifying number and photograph of the individual associated with the identifying number. The final rule requires only “an image of the document from which the unique identifying number…was obtained.”[65]
• Guidance — An interesting aspect of the final reporting rules is that FinCEN avoided resolving several of the difficult issues highlighted in the Commentary, reserving some for future guidance and issuance of FAQs,[66] and noting others to be addressed on a case-by-case basis.
• Certification — FinCEN amended the certification requirement for the BOI Report by adding the word “true” to the proposed “accurate and complete” language, to match the language used in Internal Revenue Service Form 8300 (Report of Cash Payments over $10,000 in a Trade or Business).[67]
Despite many comments that “it would be burdensome, if not impossible,” for a reporting company to certify the accuracy of a beneficial owner’s personal information, FinCEN only responded that the CTA places the burden of accurate reporting on the reporting company.[68] That rationale might not be of comfort to a senior officer tasked to sign the BOI Report if concerned that the personal identification information provided by a beneficial owner might not be accurate.
It is possible that some beneficial owners may have security or other personal concerns about revealing their residential address or passport data, but in that case the beneficial owner should obtain a FinCEN identifier before the reporting company’s first BOI report is due so that the personal information for that beneficial owner is disclosed only to FinCEN and not to the reporting company. On January 17, 2023, FinCEN published a proposed FinCEN identifier application form to be used by individuals who would be identified on a BOI report as a beneficial owner or as an applicant.[69] The FinCEN identifier could be provided to the reporting company by a beneficial owner or an applicant instead of providing the identifying information otherwise required, such as their address and their identifying document.[70] The proposed application form does not itself associate the individual with any reporting company.[71]
A reporting company can apply for an identifier, but only after filing its first report.[72] Information provided to obtain a FinCEN identifier must be updated within 30 days.[73]
But the use of a FinCEN identifier does not address the more serious issue of a beneficial owner concealing from the reporting company some ownership arrangement that would make another person a beneficial owner under the broad definitions of ownership and substantial control in the final reporting rules, or the existence of something in the corporate records suggesting that there may be hidden reportable ownership. The draft reporting form released by FinCEN on January 17, 2023,[74] would allow a reporting company to state “unknown,” or “unable to obtain” with reference to certain beneficial owner or applicant information, or “unable to identify all beneficial owners,” providing no explanation. But after many critical comments were received, including a bipartisan congressional letter to Treasury complaining that this constituted an “escape hatch” from reporting,[75] FinCEN announced that the form was not intended to provide an exception and would be revised.[76]
Will Reporting Be Deferred?
Under the final reporting rules, a reporting company formed or registered before January 1, 2024, must file its BOI report by January 1, 2025.[77] A reporting company formed after January 1, 2024, must file its BOI report within 30 days of the date of actual or public notice of creation or registration.[78] The final rules increase the time to file corrected reports to 30 days, now consistent with the requirement for updating previously reported information.[79] An exempt company does not have to file a BOI report to establish its exempt status, but if it no longer meets the exemption requirement, it must file a timely report.[80] A reporting company that later qualifies for an exemption must file an updated report as a newly exempt entity.[81] Inactive companies formed after January 1, 2020, will have to file a BOI report. Inactive companies formed on or before that date will have to report as well unless they meet further exemption requirements.[82]
But with the controversies discussed above, it seems increasingly uncertain whether FinCEN will be able to issue final rules on access to the BOI Database by its apparent target date of December 31, 2023. Will the lack of final access rules cause FinCEN to postpone the January 1, 2024, effective date for starting BOI reporting?[83]
Another concern is that, although FinCEN asserts that the initial build of the cloud infrastructure is complete and the development of the first set of system products is in progress,[84] it is not clear whether FinCEN has hired the support personnel necessary to provide guidance to, or to deal with the anticipated volume of inquiries from, reporting companies when filing commences, or to attend to other measures necessary to implement the CTA fully.[85]
At this writing, FinCEN’s pending budget request for 2024, increasing to $228 million from 2023’s $190 million, may be in jeopardy, as it appears that the House Financial Services Committee is threatening to reduce the funding to only a 1% increase.[86] On June 8, the committee sent a letter to FinCEN expressing concern that FinCEN has not laid out a “clear plan” to educate small business owners adequately about the reporting requirements,[87] but the budget issue seems to relate more to prior demands that FinCEN provide cost/benefit data about the CDD rules and suspicious activity reports under the BSA.
Despite all these concerns, FinCEN may consider itself under pressure to retain the January 1, 2024, effective date for BOI reporting. One possibility may be for FinCEN to start collecting BOI reports but defer any database access to a future date when final rules can be issued. FinCEN has hinted at such a strategy, along with deferring guidance and outreach activities,[88] and likely would have to suspend enforcement as well. Time will tell.
[1] Title LXIV, §§6401-6403, The William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-283 (H.R. 6395), 134 Stat. 338, 116th Cong. 2d Sess. §6403 (the CTA’s only substantive section) is codified as 31 U.S.C. Ch. 53, Subch. II, §5336.
[2] Jonathan H. (Jason) Warner, Corporate Transparency Act to Have Major Impact on Clients and Attorneys, 95 Fla. B. J. 38 (Nov./Dec. 2021).
[3] 131 C.F.R §1010.380 (2022). Accompanying the final rules are 40 pages of FinCEN discussion (the “Commentary”) responding to the 240 comments received by FinCEN.
[4] Beneficial Ownership Information Access and Safeguards, and Use of FinCEN Identifiers for Entities. 87 Fed. Reg. 77404 (Dec. 16, 2022) (to be codified at 131 C.F.R. §1010.380(b)(4)(ii)(B); §1010.950, and §1010 955).
[5] Regulations.gov, FINCEN-2021-0005-0505.
[6] Customer Due Diligence Requirements for Financial Institutions, 131 C.F.R. §1010.230.
[7] 12 U.S.C. §§1829b, 1951-1959 and 31 U.S.C. §§5311-5314,5316-5336, and implementing regulations, 31 C.F.R. Ch. X.
[8] Sheldon Whitehouse, et al., Whitehouse, Grassley, Wyden, Rubio, Warren Push Fincen To Improve Implementation Of Corporate Transparency Act (Mar. 15, 2023), https://www.whitehouse.senate.gov/news/release/whitehouse-grassley-wyden-rubio-warren-push-fincen-to-improve-implementation-of-corporate-transparency-act, including full text of letter; see also Brett Wolf, U.S. Senators Urge Treasury to Broaden Bank Access to Beneficial Ownership Registry, Thompson Reuters, Apr. 5, 2023, https://www.whitehouse.senate.gov/news/release/whitehouse-grassley-wyden-rubio-warren-push-fincen-to-improve-implementation-of-corporate-transparency-act. Sen. Wyden sponsored the earlier Senate version of the CTA; Sen. Rubio and Sen. Whitehouse were among the co-sponsors.
[9] 87 Fed. Reg. 77454 (Dec. 16, 2022).
[10] 31 U.S.C. §5336(c)(2)(B)(i)(II).
[11] See note 8, p. 2, at note 10, citing Conference Report, H.R. Rep. No. 116-617, 2140 (2020).
[12] Note 4, §1010.955(b)(3).
[13] 31 U.S.C. §5336(c)(2)(B)(ii).
[14] Section 1010.955(b)(3).
[15] 31 U.S.C. §5336(c)(2)(B)(ii)(II).
[16] Note 4, §1010.955(c)(2)(viii)
[17] Note 4, §1010.955(b)(1).
[18] Note 4, §1010.955(b)(4).
[19] 87 Fed. Reg. 77408 (Dec. 16, 2022).
[20] 31 U.S.C. 5336(b)(4)(B).
[21] Titles LXI-LXV, §§6001-6511, The William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-283 (H.R. 6395), 134 Stat. 338, 116th Cong. 2d Sess. The CTA is included with the AML as Tit. LXIV, §§6401-6403.
[22] Jack Bader, Beneficial Ownership Information: In Certifications We Trust, Anti-Money Laundering — WTF? (Apr. 4, 2023), https://antimoneylaundering.wtf/f/beneficial-ownership-information-in-certifications-we-trust.
[23] Note 8 at 4.
[24] FATF, International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation 94 (Feb. 2023), available at https://www.fatf-gafi.org/content/dam/fatf-gafi/recommendations/FATF%20Recommendations%202012.pdf.coredownload.inline.pdf.
[25] Regulations.gov, FINCEN-2021-0005-0496.
[26] Id. at 8.
[27] Id. at 9, citing Global Witness, The Companies We Keep (Jul. 2018), https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/anonymous-company-owners/companies-we-keep/; see also Oliver Bullough, Britain, Headquarters of Fraud, The Guardian (Apr. 22, 2018), https://www.theguardian.com/commentisfree/2018/apr/22/the-sunday-essay-britain-headquarters-of-fraud, and Nienke Palstra and Sam Leon, In Pursuit of Hidden Owners Behind UK Companies, Global Witness Blog (Feb. 6, 2018), https://www.globalwitness.org/en/blog/pursuit-hidden-owners-behind-uk-companies/.
[28] See note 25 at 9.
[29] U.K. Fact Sheet on Verification (June 20, 2023), https://www.gov.uk/government/publications/economic-crime-and-corporate-transparency-bill-2022-factsheets/fact-sheet-identity-verification-and-authorised-corporate-service-providers.
[30] U.S. DOS, Summit for Democracy Commitment on Beneficial Ownership and Misuse of Legal Persons (Mar. 29, 2023), https://www.state.gov/summit-for-democracy-commitment-on-beneficial-ownership-and-misuse-of-legal-persons/. The commitment may be related to the Biden administration’s United States Strategy on Counting Corruption (Mar. 29, 2023), https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/29/fact-sheet-implementing-the-united-states-strategy-on-countering-corruption-accomplishments-and-renewed-commitment-in-the-year-of-action/.
[31] FATF, Guidance on Beneficial Ownership at 7.2 (Recommendation 24), https://www.fatf-gafi.org/en/publications/Fatfrecommendations/R24-public-consultation-oct-2022.html.
[32] Testimony of Richard K. Delmar: Hearing on “Holding the Biden Administration Accountable for Wasteful Spending and Regulatory Overreach” (Mar. 8, 2023), available at https://docs.house.gov/meetings/BA/BA09/20230308/115385/HHRG-118-BA09-Wstate-DelmarR-20230308.pdf.
[33] https://www.fincen.gov/sites/default/files/2023-04/HHRG-118-HFSC-DasH-20230427.pdf.
[34] Fact Sheet: Beneficial Ownership Information Access and Safeguards Notice of Proposed Rulemaking (NPRM) (Dec. 15, 2022), https://www.fincen.gov/nprm-fact-sheet.
[35] David Mack, A Former Treasury Official was Sentenced to 6 Months in Prison for Giving Documents to BuzzFeed News, BuzzFeed News (June 3, 2021), https://www.buzzfeednews.com/article/davidmack/fincen-natalie-mayflower-sours-edwards-sentencing.
[36] Will Fitzgibbon, et al., Here’s What is Changing after the FINCEN Files Shook the World of Banking, BuzzFeed News (Dec. 17, 2020), https://www.buzzfeednews.com/article/willfitzgibbon/fincen-files-money-laundering-laws-us-world.
[37] Financial Services Committee Press Release: McHenry, Luetkemeyer Slam Beneficial Ownership Final Rule (Sept. 29, 2022), available at https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408444. For other critical letters from Rep. McHenry and Rep. Luetkemeyer, see Re: Department of the Treasury’s Notice of Proposed Rulemaking Titled “Beneficial Ownership Information Reporting Requirements,” RIN 1506-AB49, FINCEN -2021-0005, 86 Fed. Reg. 69920 (Dec. 8, 2021), available at https://financialservices.house.gov/uploadedfiles/2022-03-02_pmc_bl_to_yellen_and_das_on_nprm.pdf and Letter from Blaine Luetkemeyer to Attorney Gen. Garland (Feb. 1, 2023), available at https://luetkemeyer.house.gov/uploadedfiles/letter_to_doj_re_fincen.pdf. See also Financial Services Committee, McHenry Highlights Need to Protect Americans’ Civil Liberties at Hearing with FinCEN (Apr. 28, 2022), https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408320 (for a report of a committee hearing with further criticism of FinCEN by Rep. McHenry).
[38] FinCEN, Beneficial Ownership Information Reporting Rule Fact Sheet (Sept. 29, 2022), https://www.fincen.gov/beneficial-ownership-information-reporting-rule-fact-sheet.
[39] 131 C.F.R §1010.380(d(2)(ii)(C).
[40] 131 C.F.R §1010.380(c)(1)(ii).
[41] Commentary at 59538.
[42] 131 C.F.R §1010.380(a)(2); 131 C.F.R §1010.380(b)(2)(iv).
[43] 131 C.F.R §1010.380(e); see also Commentary at 59536.
[44] 131 C.F.R. §1010.230(d).
[45] 131 C.F.R §1010.380(d)(1).
[46] 131 C.F.R §1010.380(f)(8).
[47] Commentary at 59526.
[48] 131 C.F.R §1010.380(d)(1)(C).
[49] 131 C.F.R §1010.380(d)(1)(D).
[50] 131 C.F.R §1010.380(d)(1)(ii); see also Commentary at 59529.
[51] Commentary at 59526.
[52] Commentary at 59529.
[53] FinCEN, Beneficial Ownership Information Reporting, https://www.fincen.gov/boi-faqs.
[54] Now 131 C.F.R §1010.380(d)(2)(ii)(C); see also Commentary at 59530-59533. Note that §1010.380(d) was reorganized in the final rules.
[55] Now 131 C.F.R §1010.380(d)(3)(ii)(C).
[56] 131 C.F.R §1010.380(d)(3); see also Commentary at 59333-59535.
[57] 131 C.F.R §1010.380(b)(1)(C)
[58] Commentary at 59518-19.
[59] Commentary at 59518.
[60] 131 C.F.R §1010.380(b)(1)(ii)(C)(1) and (2); see also Commentary at 59518-59519.
[61] Id.
[62] 131 C.F.R §1010.380(b)(1)(ii)(d); see also Commentary at 59519.
[63] Commentary at 59519.
[64] Commentary at 59519-20.
[65] 131 C.F.R §1010.380(b)(1)(ii)(E).
[66] See, e.g., note 53.
[67] 131 C.F.R §1010.380(b).
[68] Commentary at 59514.
[69] 131 C.F.R §1010.380(b)(4)(i)(A).
[70] 131 C.F.R §1010.380(b)(4)(ii)(A).
[71] 88 Fed. Reg. 2764 (Jan. 17, 2023).
[72] 131 C.F.R §1010.380(b)(4)(B), raising the question of the utility of the identifier to the reporting company. Note that in the proposed access rules discussed above, FinCEN would amend presently reserved 131 C.F.R §1010.380(b)(4)(ii)(B) to allow a reporting company to report an intermediate entity’s FinCEN identifier in lieu of a beneficial owners information, in certain circumstances.
[73] 131 C.F.R §1010.380(b)(4)(iii).
[74] 88 Fed. Reg. 2760 (Jan. 17, 2023).
[75] Rep. McHenry, et al, Letter: Re: Department of the Treasury’s Notice of Proposed Rulemaking Titled “Agency Information Collection Activities; Proposed Collection; Comment Request; Beneficial Ownership Information Reports,” Docket Number FINCEN-2023-0002, OMB control number 1506-0076, 88 FR 2760, 2023-00703 (January 17, 2023) (Apr. 3, 2023), available at https://financialservices.house.gov/uploadedfiles/2023-04-03-boi_letter-final.pdf.
[76] Spencer Woodman, U.S. Treasury Faces a Wave of Criticism Over Faltering Push to Unmask Anonymous Companies and Track Dirty Money, International Consortium of Investigative Journalists (Apr. 11, 2023), https://www.icij.org/investigations/fincen-files/u-s-treasury-faces-a-wave-of-criticism-over-faltering-push-to-unmask-anonymous-companies-and-track-dirty-money/; see also FinCEN,
Treasury Promises to Amend BOI Report Form, https://www.fincenreport.com/blog/treasury-promises-to-amend-boi-report-form.
[77] 131 C.F.R §1010.380(a)(1)(iii).
[78] 131 C.F.R §1010.380(a)(1)(i) and (ii).
[79] 131 C.F.R §1010.380(a)(2) and (3).
[80] 131 C.R.R. §1010.380(a)(1)(iv).
[81] 131 C.F.R. §1010.380(a)(2)(ii).
[82] 131 C.F.R. §1010.380(c)(2)(xxiii).
[83] Comments of James Richards (Dec. 24, 2022), Regulations.gov, FINCEN-2021-0005-0464, noting several other impediments.
[84] 87 Fed. Reg. 77407 (Dec. 16, 2022).
[85] Id. But see Richards, note 83, at 2-3.
[86] See note 22.
[87] Rep. McHenry, et al., Letter: McHenry, Lawmakers Demand Clarity from FinCEN, Treasury Regarding Beneficial Ownership Reporting Requirements (June 7, 2023), available at https://financialservices.house.gov/news/documentprint.aspx?DocumentID=408858.
[88] 87 Fed. Reg. 77408 (Dec. 16, 2022).
Jonathan H. (Jason) Warner concentrates his practice on international tax matters. He is a former chair of The Florida Bar Tax Section and was named the section’s Tax Attorney of the Year in 2008. He was a principal participant in the section’s FIRPTA withholding tax project that resulted in enactment of a new model federal tax withholding system. He is a past chair of the Committee on International Tax of the ABA Section of International Law and Practice, and has authored several comments to Congress and the Treasury on pending federal legislation or regulations. He has been a frequent speaker and writer on international and other tax topics. He received his J.D. in 1971 from Columbia University School of Law, where he was managing editor of the Columbia Journal of Transnational Law. Prior to opening his own practice in 1999, he was a partner in the law firms Greenberg, Traurig; Fowler, White (Miami); and Baker & McKenzie. An early adaptor to telecommuting, he now works primarily from the North Carolina mountains.
This column is submitted on behalf of the Tax Section, Shawn Wolf, chair, and Charlotte A. Erdmann, Daniel W. Hudson, Angie Miller, and Abrahm Smith, editors.
