Seventh Post in an Extended Series on Legislative Changes to BSA/AML Regulatory Regime
On April 5, 2021, the Financial Crimes Enforcement Network (“FinCEN”) issued an advance notice of proposed rulemaking (“ANPRM”) to solicit public comment on questions pertaining to the implementation of the Corporate Transparency Act (“CTA”), passed as part of the Anti-Money Laundering Act of 2020 (“AMLA”). The CTA requires certain legal entities to report their beneficial owners at the time of their creation to a database accessible by U.S. and foreign law enforcement and regulators, and to U.S. financial institutions seeking to comply with their own Anti-Money Laundering (“AML”) and Customer Due Diligence (“CDD”) compliance obligations.
According to the ANPRM, the ability to operate through legal entities without requiring the identification of beneficial owners is a key risk for the U.S. financial system. The CTA seeks to mitigate the risk by reducing an individual’s ability to use corporate structures to conceal illicit activity such as money laundering, financing of terrorism, proliferation financing, serious tax fraud and human and drug trafficking. The CTA seeks to set a clear federal standard for incorporation practices, protect vital U.S. national security interests, protect interstate and foreign commerce, better enable various law enforcement agencies to counter illicit activities and bring the U.S. into compliance with international standards. With the goals of the CTA in mind, the ANPRM seeks public input on procedures and standards for reporting companies to submit information to FinCEN about their beneficial owners, and input on the implementation and maintenance of a database safeguarding disclosed information subject to appropriate protocols.
Written comments on the ANPRM are due soon – by May 5, 2021. The CTA is a critical development in AML regulation, and FinCEN can expect a considerable response to this important ANPRM, both from the businesses that are covered and the financial institutions that would have access to the beneficial ownership database. Although the ANPRM is detailed and poses many questions, the ultimate, real-world implementation of the CTA will involve even more questions.
Continue Reading FinCEN Seeks Comments on Corporate Transparency Act Implementation