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ABA Makes Three Big Points on FinCEN Regulations

The American Banking Association made three big points in their comment letter to FinCEN on its pending ANPRM to implement the Corporate Transparency Act. 

U.S. Banks have been tracking the beneficial ownership of their corporate customers for years under the KYC and AML rules. Those rules require banks to collect beneficial ownership information regarding their customers and to report cash transactions over $10,000.  The Corporate Transparency Act (CTA) will take government efforts to fight money laundering to the next level by requiring nearly all private companies to file a beneficial ownership report with FinCEN. 

Definition of Similar Entities

The ABA noted that the CTA uses the phrase, "corporations, limited liabilities and similar entities" through to describe the types of companies that may be required to file reports.  The CTA, however, does not define "similar entities."  To resolve this ambiguity, the ABA recommended that the regulation define the phrase to mean any entity that is formed by the filing of a document with a state or Tribal agency.  By adopting such a broad definition that is linked to a state or Tribal filing, the definition will create a bright-line test and will avoid excluding anything that is created by such a filing. 

Who is a Beneficial Owner

The ABA also noted that the CTA does not completely define the term, "beneficial owner."  The CTA defines the term to include a person who beneficially owns 25% or more of the company as well as any person who is in "substantial control" of the company.

The ABA applauded the 25% ownership rule, but asked for clarification on how it should be calculated.  Many entities have complex "waterfall" ownership provisions in which the net proceeds of the enterprise are owned in differing percentages at various times or at various income levels.  The ABA does not suggest how percentage ownership should be calculated, but asked FinCEN to clarify the point in its regulation.

The CTA also does not define the term "substantial control."  The ABA noted that a corporate officer with signature authority on a bank account might have control of the account, but yet not have control over the corporation itself.  The ABA analogized to FinCEN's 2016 Customer Due Diligence (CDD) rule.  At the same time, however, the ABA claimed that the CDD definition of "substantial control" is not always clear and asked FinCEN to provide clarity for the CTA in its upcoming regulation.

Validating Information

Finally, the ABA recommended that the FinCEN regulation include provisions for validating the information contained in each report.

Each report will be certified by the applicant who files it.  In addition, the ABA suggested that FinCEN verify a company's name and existence by collecting the state or Tribal document (such as articles of incorporation) that create the company itself.  The ABA also suggested verifying tax identification numbers with the IRS.  


The CTA requires FinCEN to adopt regulations by December 31, 2021 and FinCEN seems to be pacing itself to achieve that goal.  Once implemented, pre-existing companies will have two years in which to file their first beneficial ownership report.  Newly-created companies, however, will need to file their initial report at the time they are formed. 

ABA has long supported efforts to modernize the current anti-money laundering/countering the financing of terrorism (AML/CFT) regime, and we encouraged Congress to enact legislation establishing the beneficial ownership registry.


fincen, corporate transparency act, american banking association

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