The Financial Crimes Enforcement Network (“FinCEN”) has extended the deadline for reporting beneficial ownership information (“BOI”) under the Corporate Transparency Act (“CTA”) for reporting companies formed in 2024. Specifically, FinCEN has extended the filing deadline from 30 to 90 days from the date of formation for both domestic and foreign entities created or registered on or
The Financial Crimes Enforcement Network (“FinCEN”) has issued a flurry of publications relating to the Corporate Transparency Act (“CTA”). They pertain, in part, to a proposed extension of the filing deadline for certain reports of Beneficial Ownership Information (“BOI”); a proposed revision to the BOI reporting form; and expanded FAQs. We discuss each in turn.…
The Financial Crimes Enforcement Network (“FinCEN”) has published a Small Entity Compliance Guide (the “Guide”) for beneficial ownership information (“BOI”) reporting under the Corporate Transparency Act (“CTA”), as well as updated FAQs regarding CTA compliance.
The Guide contains six chapters and an appendix. It is 56 pages long. It appears to be useful to its apparent target audience, which is small businesses confronting relatively simple issues under the CTA. The Guide is relatively clear, simply-worded and contains helpful infographics. However, what neither the Guide nor the updated FAQs does is provide any real insights into how to interpret the BOI reporting regulations. Rather, they reiterate the existing BOI regulatory requirements. Thus, anyone looking for insights into nuanced CTA issues will be disappointed.
The CTA takes effect on January 1, 2024. On that date, FinCEN needs to have implemented a working data base to accept millions of reports by newly-formed companies required to report BOI under the CTA, as well as reports by the even greater population of existing reporting companies, which must report their BOI by January 1, 2025. This is a logistically daunting task, because FinCEN estimates that over 30 million entities will need to register by the 2025 date. Perhaps one of the most interesting things about the Guidance is that it clearly asserts that the January 1, 2024 date is good, and that the CTA BOI database will be functioning by then.
That claim is debatable. FinCEN still needs to issue important and basic regulations implementing the CTA, including final rules regarding access to the data base, and proposed rules regarding how the existing Customer Due Diligence (“CDD”) Rule applicable to banks and other financial institutions might be amended – and presumably, expanded – to align with the different and often broader requirements of the CTA. Further, FinCEN’s notice and request for comment regarding FinCEN’s proposed form to collect and report BOI to FinCEN was criticized roundly. Given the backlash, FinCEN now is revising the proposed reporting form.
Similarly, on June 7, 2023 four members of the U.S. House of Representatives (the Chairpersons of the House Committee on Financial Services; the House Committee on Small Business; the House Subcommittee on National Security, Illicit Finance, and International Financial Institutions; and the House Subcommittee on Financial Services and General Government) sent a letter directed to Janet Yellen, Secretary of the Treasury, and Himamauli Das, Former Acting Director of FinCEN, regarding the status of the implementation of the CTA. The letter, fairly or not, stresses the need for transparency by FinCEN, and implies that January 1, 2024 may not be a viable date.
The fact that FinCEN devoted its limited resources to producing a 56-page publication which repeats but does not explicate current regulatory requirements for BOI reporting is unusual, given FinCEN’s many other pressing demands – such as finishing the rest of the regulations under the CTA. However, it is possible that the Guide is a reaction to demands placed upon FinCEN by certain members of Congress, who are pushing for clarity for affected businesses.…
On August 30, 2023, the Federal Council of Switzerland announced proposed laws (the “Press Release”) to strengthen its anti-money laundering (“AML”) efforts in important ways.
The proposal includes an obligation for attorneys and other advisers to conduct due diligence; the creation of a centralized, non-public register of beneficial owners (“BO”); and new measures concerning sanctions violations, real estate transactions, and precious metal traders.
The Federal Council has found that “[m]oney laundering and terrorist financing pose a serious threat to financial system integrity” and that criminals (whether in Switzerland or over the world) misuse legal entities to conceal assets and in furtherance of illicit activity. As a “major financial centre,” The Federal Council realizes that Switzerland is exposed to these risks. In the eyes of the world, the United States and Switzerland often have vied for the dubious title of the world’s top haven for tax evasion and money laundering. And Switzerland has been feeling the pressure due to being one of the world’s top economies which still has not implemented regulations for BOs.
The Federal Council published the proposed laws in German (which we do not review in this blog), and issued in English an FAQ and an informative graphic. The Federal Council is seeking input until November 29, 2023, and will act on the legislation in 2024.
The aim of the proposed laws is to “contribute significantly to protecting the financial centre from funds of criminal origin, and to strengthening Switzerland as a business location.” Although the Swiss financial sector has more robust safeguards against money laundering and terrorist financing activities, the FAQ explains that “there are gaps in other, nonfinancial areas in this respect” and that “it is necessary to also include particularly risky activities in the non-financial sector in efforts to prevent and combat financial crime.” The Federal Council has found that the “high money laundering risks associated with legal entities and trusts” require legislation to strengthen the Swiss framework. According to the Press Release, prosecuting authorities would benefit from increased transparency to more quickly and accurate identifying the true owners of legal entities. …
As we have blogged repeatedly, there is a close nexus between money laundering and tax crimes. The frequent connection between the two sets of offenses – and the potentially related methods of combatting them – is a topic that is receiving growing attention. It is important for many reasons, including the increase in international cooperation and information sharing across countries and law enforcement agencies in regard to both sets of offenses.
We therefore are very pleased to welcome to Money Laundering Watch guest bloggers Emmanuel Mathias and Adrian Wardzynski, who have authored a well-received Working Paper, Leveraging Anti-Money Laundering Measures to Improve Tax Compliance and Help Mobilize Domestic Revenues as part of the International Monetary Fund (“IMF”) publication series (“Working Paper”).
As we will discuss, the Working Paper advocates leveraging anti-money laundering (“AML”) measures to enhance tax compliance, tackle tax crimes, and help mobilize domestic revenues.
Emmanuel Mathias heads the Governance and Anti-Corruption division in the IMF’s Legal Department, where he oversees the IMF’s work on anti-corruption and the rule of law. He also worked extensively on AML issues. Prior to joining the IMF in 2005, Emmanuel served as a researcher in economics, was trained as a customs special agent, and worked for the French Financial Intelligence Unit. Emmanuel holds a Ph.D. in Economics from the University of Paris – Pantheon Sorbonne. He graduated from the Institute of political studies of Strasbourg, and was admitted to the French national school of administration.
Adrian Wardzynski works in the Financial Integrity division in the IMF’s Legal Department. In his role as a Counsel he focuses on financial integrity issues relating to money laundering, tax crimes, and corruption. Before joining the IMF in 2021, Adrian was a Tax Policy Advisor at the Organization for Economic Cooperation and Development. He also worked on taxation of multinational enterprises and financial institutions in the private sector and Switzerland’s State Secretariat for International Finance. Adrian holds an LL.M. in Taxation from the London School of Economics and Political Sciences.
The IMF is a global organization which works to achieve sustainable growth and prosperity for all of its 190 member countries. It does so by supporting economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being To fulfill these missions, IMF member countries work collaboratively with each other and with other international bodies.
This blog post again takes the form of a Q & A session, in which Mr. Mathias and Mr. Wardzynski, in their personal capacities, respond to questions posed by Money Laundering Watch about the Report. We hope you enjoy this discussion of this important topic. – Peter Hardy and Siana Danch.…
Without much fanfare, the Financial Crimes Enforcement Network (FinCEN) published in June its Spring 2023 Rulemaking Agenda, which provides proposed timelines for upcoming key rulemakings projected throughout the rest of 2023. FinCEN continues to focus on issuing rulemakings required by the Anti-Money Laundering Act of 2020 (the “AML Act”) and the Corporate Transparency Act (“CTA”). FinCEN has been criticized for being slow in issuing regulations under the AML Act and the CTA, but Congress has imposed many obligations upon FinCEN, which still is a relatively small organization with a limited budget.…
Enforcement Trends, Crypto, Regulatory Developments — and More
I am very pleased to co-chair again the Practicing Law Institute’s 2023 Anti-Money Laundering Conference on May 16, 2023, starting at 9 a.m. in New York City (the event also will be virtual).
I am also really fortunate to be working with co-chair Elizabeth (Liz) Boison…
On March 24, 2023, the Financial Crimes Enforcement Network (FinCEN) issued a press release and published initial guidance to assist the public in understanding the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA). The guidance comprised Answers to Frequently Asked Questions (FAQs), a one-pager informative graphic explaining the applicable reporting filing dates, and a one-pager Answers to Key Questions on beneficial owner reporting. Additionally, FinCEN published a one-minute Introductory Video and a more detailed four-and-a-half minute Information Video about the BOI reporting requirement.
In the press release, FinCEN Acting Director Himamauli Das stated that the agency was committed to ensuring the implementation of the CTA’s BOI reporting obligations was “as simple as possible, particularly for small businesses who may have never heard of or interacted with FinCEN before.”
We have blogged extensively on the CTA and FinCEN’s final and proposed regulations (here, here, here, and here), and will not repeat our analysis of these regulations – other than to note that the stated primary goal of the CTA was to enable law enforcement and regulators to obtain information on the “real” beneficial owners of so-called “shell companies,” including foreign entities registered in the United States, in order to “crack down” on the misuse of such companies for potential money laundering, tax evasion and other offenses.
As we will discuss, these publications from FinCEN appear to be designed to assist the general public in understanding the basic rules regarding the CTA and its implementing regulations. To that extent, they succeed on their own terms. But, they do not address more difficult or more nuanced issues presented by the statute and the regulations. Meanwhile, and as we will discuss, FinCEN has been subject to pressure and criticism from both the U.S. Senate and industry groups regarding many of these same difficult and nuanced issues, including (i) whether FinCEN will or can verify the BOI information reported to it under the CTA, and (ii) revising the CTA reporting form currently proposed by FinCEN, which, as we have blogged, invites bad actors to not answer key questions.…
The Financial Action Task Force (“FATF”) Plenary was held on February 22-24, bringing together delegates from around the world to meet in Paris and discuss a variety of global financial crimes and ongoing risk areas. In a historic move, FATF decided to suspend the Russian Federation from membership in the intergovernmental organization, based upon its actions in Ukraine over the past year. We will discuss that decision, as well as the other major outcomes of the Plenary, which involve beneficial ownership, virtual assets, ransomware, the art and antiquities market, and changes to FATF’s so-called “grey list.”…
On February 14, 2023, both the American Bankers Association (“ABA”) and the Bank Policy Institute (“BPI”) submitted comments to the Financial Crimes Enforcement Network (“FinCEN”) on FinCEN’s notice of proposed rulemaking (“NPRM”) relating to access to beneficial ownership information (“BOI”) reported to FinCEN under the Corporate Transparency Act (“CTA”). While both organizations had similar comments, mainly being that the proposed limits on FIs’ ability to use BOI retrieved from the database contradicts the CTA’s objective, the ABA recommended that FinCEN entirely withdraw the NPRM. Below, we break down each organization’s comments and strong critiques regarding the NPRM.…