New beneficial ownership restrictions, according to FinCEN Director, will advance US AFC efforts

New beneficial ownership restrictions that are set to take effect in January  have been promised by the director of the US Financial Crimes Enforcement Network (FinCEN) to be a "significant step forward" for the country's efforts to combat financial fraud.

The recommendations, approved under the Corporate Transparency Act (CTA), would be a "valuable addition" to the US's "existing tools to counter illicit finance," according to Acting Director of FinCEN Himamauli Das.

"It is the culmination of not only years of hard work at Treasury, but years of bipartisan efforts by Congress, the law enforcement community, national security agencies, and other stakeholders to bolster the United States’ corporate transparency framework," Mr. Das continued.

The FinCEN director emphasized the new measures will play a "important role" in protecting American taxpayers and businesses that follow the law but are "hurt by criminals that use companies for illegal reasons" in a speech during the ACAMs conference.

The Corporate Transparency Act will be put into action through three rulemaking processes, the first of which is the beneficial ownership information reporting rule, which will take effect on January 1, 2024. (CTA).

According to these requirements, businesses that are classified as "reporting companies" must provide FinCEN with information on their beneficial owners and the person who founded the company.

A reporting company that was established or registered prior to January 1st has one year to file its initial reports; however, a reporting company that registers after that date has just 30 days to do so.

Companies will be forced to provide their own identity as well as four pieces of information—including the names, dates of birth, addresses, and identification numbers—about each of its beneficial owners and business applicants.

According to Mr. Das, under the guidelines, a person is considered to be a beneficial owner if they "directly or indirectly, either exercises substantial control over a reporting company, or owns or controls at least 25 percent of the ownership interests of a reporting company."

The "Access Rule," the CTA's second pillar, outlines procedures for how law enforcement can access the beneficial ownership database.

The CTA stipulates that the Customer Due Diligence (CDD) regulation must be updated no later than a year after the reporting rule becomes effective. This revision is the third pillar of the CTA.

According to Mr. Das, "In parallel with the rulemaking effort, FinCEN is developing the infrastructure to build a secure and confidential database that meets the highest security standards, and that ensures that only authorised users can access the information for authorised purposes".

Mr. Das emphasized that "security and confidentiality are incredibly important – to us and it’s required by the Corporate Transparency Act."

He said FinCEN anticipates having the system up and running by the time the reporting regulation takes effect in January, but cautioned that it would be a "challenging process" and "hugely resource-intensive."

The COVID-19 epidemic, he said, "cost the American taxpayer and hurt those that need help," and the Treasury has observed "bad actors" utilizing shell businesses to "fraudulently apply for assistance" under several Federal assistance programmes.

According to Mr. Das, "foreign governments and drug traffickers alike use anonymous shell and front companies to conduct illicit activity, and they undermine national security and confidence in our financial system."

He thanked the US Congress for supporting FinCEN and its budget and said that the agency was working "incredibly hard" to fulfill all of its requirements under the AML Act.

By fLEXI tEAM