FinCEN Issues Advanced Notice of Public Rulemaking on CTA Beneficial Ownership Reporting Requirements

FinCEN - the Financial Crimes Enforcement Network - announced on April 1, 2021 its Advanced Notice of Public Rulemaking on the implementation of the beneficial ownership reporting requirements created by the 2020 Corporate Transparency Act.

Comments are due by May 5, 2021.

The ANPRM outlines the purpose of the CTA and its requirement that all private businesses that are not exempt file a report with FinCEN that discloses any person who beneficially owns more than 25% of the business or is otherwise in "substantial control" of the business.

The beneficial ownership reporting requirement is new to U.S. law and is intended to bring U.S. practices closer in line with European states that require the ongoing disclosure of beneficial ownership.  

As Congress noted in the legislation, “malign actors seek to conceal their ownership of corporations, limited liability companies, or other similar entities in the United States to facilitate illicit activity, including money laundering, the financing of terrorism, proliferation financing, serious tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption."  By requiring corporations, limited liability companies and other business entities to disclose their owners and others in substantial control, Congress hopes to help law enforcement track flows of money in support of anti-money laundering laws.  

The ANPRM lists forty-eight questions that focus on important aspects of the upcoming regulations.  The regulations will be one of the most important developments in U.S. business laws in decades because U.S. businesses often lack internal controls for the collection of beneficial ownership information and the types of personally-identifiable information ("PII") that the CTA will require those businesses to collect.  Business owners and the attorneys, accountants and other professionals who serve businesses will need to find new tools to monitor changes in beneficial ownership, collect and safely store PII and report changes in beneficial ownership within the timelines required by the new law. 

Update: On September 29, 2022, FinCEN issued its Final Rule on beneficial ownership reporting, setting the implementation date at January 1, 2024.