On December 15, 2022, the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a lengthy Notice of Proposed Rulemaking to implement beneficial ownership information (“BOI”) access and safeguards provision of the Corporate Transparency Act (“CTA”) (the “Access NPRM”). The Access NPRM provides a framework by which authorized recipients may access BOI, providing different tiers of access for agencies and financial institutions who may seek this information in connection with anti-money laundering efforts.
By way of background, the CTA required a variety of entities registered to do business in the U.S. (e.g., corporations and limited liability companies) to report beneficial ownership to FinCEN. FinCEN and other agencies use this information to assist law enforcement and combat money laundering. The CTA, however, requires that this information be subject to a high degree of protections and directs FinCEN to ensure appropriate safeguards and use of this highly sensitive information. The Access NPRM proposes to achieve this goal by creating a secure database for access to BOI, and then providing multi-tiered secure access to five categories of authorized recipients:
- Federal Agencies Engaged in National Security, Intelligence or Law Enforcement – These agencies, including the FBI, CIA and others, would be able to log into the BOI database and would receive access based on a justification to FinCEN that the request was in furtherance of such activities. FinCEN would audit and review these requests. These agencies would have broad, direct access to the BOI database.
- State, Local and Tribal Law Enforcement Agencies – These non-federal agencies can obtain access to the BOI database, but only if a court of competent jurisdiction has approved access. These agencies would upload documents issued by courts concerning access to the BOI database, and FinCEN would grant access based on the court documents.
- Financial Institutions and their Regulators – Financial institutions would be permitted by request data from the BOI, but their access would be much more limited. Financial institutions could submit requests, but only for the purposes of complying with Customer Due Diligence (“CDD”) requirements, and only with the consent of the reporting company to which the BOI pertains. Regulators can request access to BOI in connection with the institutions they supervise and/or in connection with their own law enforcement activity.
- U.S. Treasury Department — The Treasury Department would, under the Access NPRM, have a unique level of access, with BOI information available to variety of treasury officers, including those focused on tax administration and enforcement actions.
Financial institutions should be mindful of the limited access they will have to the BOI database to implement the protections of the CTA. Because the Access NPRM would limit access to only specific institutions who consent in advance, financial institutions should not rely on access to the BOI as a complete substitute to other forms of required due diligence and risk management. Further, given the wide access given to Treasury Department employees, an uptick in enforcement and tax activity is to be expected.
News Release: https://www.fincen.gov/news/news-releases/fincen-issues-notice-proposed-rulemaking-regarding-access-beneficial-ownership
Fact Sheet: https://www.fincen.gov/nprm-fact-sheet