BPI Submits Recommendations to FinCEN as Bureau Implements Beneficial Ownership Changes

The Bank Policy Institute[1] appreciates the opportunity to comment on the Financial Crimes Enforcement Network’s notice of proposed rulemaking to implement the beneficial ownership information reporting provisions of the Corporate Transparency Act (the “CTA”).[2] BPI has been and remains a strong supporter of ending the use of anonymous shell companies and modernizing the U.S. anti-money laundering/countering the financing of terrorism (“AML/CFT”) regime. BPI appreciates FinCEN’s efforts to implement the CTA and the Anti-Money Laundering Act of 2020 (the “AML Act”) in a manner that maximizes efficiency and effectiveness while minimizing unnecessary burdens on impacted entities. BPI also appreciates FinCEN’s continued devotion of significant time and resources to carefully considering the many issues raised by the CTA and the AML Act and FinCEN’s transparency with regard to the rulemaking process. BPI has a keen interest in the complex issues associated with accessing the beneficial ownership information collected by FinCEN under the authority of the CTA and in potential future related revisions to FinCEN’s Customer Due Diligence Rule (“CDD Rule”).[3] Accordingly, BPI looks forward to continued engagement with FinCEN as efforts to implement the CTA and the AML Act advance, and supports direct and transparent engagement between FinCEN and financial institutions and their trade associations, including on the uniquely complex issue of financial institution access to the information reported to FinCEN.

This letter addresses elements of the proposed rule that are of particular importance to BPI members, bearing in mind the existing CDD Rule, banks’ experiences complying with that rule, and potential revisions to that rule. Although FinCEN intends to undertake separate rulemakings both for CDD Rule revisions and for regulations governing access to and disclosure of beneficial ownership information reported to FinCEN,[4] the final rule that results from this NPRM will necessarily have a substantive impact on the nature and content of those future rulemakings. As such, we address in this letter the importance of harmonizing reporting requirements under the CTA with financial institutions’ obligations under the CDD Rule and future revisions to that rule.  BPI is concerned that significant disparities between beneficial ownership reporting under the CTA and the requirements of the CDD Rule may undermine the ability of FinCEN’s new beneficial ownership registry to serve as an “accurate, complete, and highly useful” registry of beneficial ownership information.[5] We believe that, if the registry does not serve this function, it would frustrate congressional intent not only with respect to the registry but also with respect to revisions to the CDD Rule, which are supposed to bring that rule “into conformance with [the AML Act] and the amendments made by [the AML Act].”[6] At the same time, BPI strongly encourages FinCEN to balance data accuracy, reliability, and utility with compliance burdens.[7]Indeed, the CTA mandates that FinCEN, in revising the CDD Rule, “reduce any burdens on financial institutions . . . that are, in light of the enactment of [the AML Act] and the amendments made by [the AML Act], unnecessary or duplicative.”[8]

For these reasons, BPI continues to believe that (i) the beneficial ownership registry mandated by the CTA, which FinCEN proposes to implement as the “Beneficial Ownership Secure System” (the “FinCEN Registry” or the “registry”), should serve as a centralized source of beneficial ownership information about reporting companies that is designed to provide highly useful information to all authorized users of the registry, (ii) banks should be able to rely on information in the registry to facilitate compliance with applicable customer due diligence requirements, and (iii) banks should not be subject to a duplicative requirement to separately collect and verify beneficial ownership information from customers who are also required to report to FinCEN under the CTA.

To read the full comment letter, please click here.

[1] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost two million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

[2] Financial Crimes Enforcement Network, Beneficial Ownership Information Reporting Requirements, Notice of Proposed Rulemaking, 86 Fed. Reg. 69920 (Dec. 8, 2021) (the “NPRM”).

[3] 31 C.F.R. § 1010.230; see Financial Crimes Enforcement Network, Customer Due Diligence Requirements for Financial Institutions, 81 Fed. Reg. 29398 (May 11, 2016).

[4] William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021(“NDAA 2021”), § 6403(d), Pub. L. No. 116-283, 134 Stat. 3388, 4624.

[5] 31 U.S.C. § 5336(b)(4)(B)(ii).

[6]NDAA 2021, § 6403(d)(1)(A).

[7] For additional information, see BPI’s Comment Letter, dated May 5, 2021, in response to FinCEN’s April 5, 2021 Advance Notice of Proposed Rulemaking (the “ANPRM”) regarding beneficial ownership information reporting requirements available at https://bpi.com/wp-content/uploads/2021/05/BPI-Comment-Letter- to-FinCEN-re-Beneficial-Ownership-Reporting-Requirements-ANPR-2021.05.05.pdf.

[8] NDAA 2021, § 6403(d)(1)(C); see also NPRM at 69929.