Business-Ownership Registry Access Rules Should Ensure Banks Can Focus on Threats

Washington, D.C. – BPI today responded to FinCEN’s proposed rule on access and safeguards for beneficial ownership information that will be reported to the bureau under the recently enacted Corporate Transparency Act. When crafting limits around access to this information, FinCEN should carry out Congress’ goals to ensure the information’s usefulness in mitigating illicit finance risks and eliminate unnecessary burdens on small businesses.

What’s happening: FinCEN is seeking input on a proposed rule for how banks and other users can access the corporate beneficial ownership directory established by the Anti-Money Laundering Act, a comprehensive AML reform law that included the CTA.  The directory will contain information about businesses’ beneficial owners to aid law enforcement and financial institutions in their efforts to combat the use of anonymous shell companies to launder money. The proposed rule specifies who will have access to information in the directory, how they may use that information, and how they must secure it.  The directory is meant to enhance banks’ and law enforcement’s ability to root out illicit financing and criminal activity, and so overly stringent limits on the ability of banks to access and use information would undermine that key policy goal.

What BPI is saying:

“We strongly supported the legislation creating a beneficial ownership registry because it would make it easier to stop flows of illicit finance, but the proposed rule imposes so many restrictions that it would not achieve that goal.” – Greg Baer, BPI president and CEO.

Why it matters: As drafted, the rule narrowly limits banks’ database access and would restrict the ways banks could use beneficial ownership information to comply with the Bank Secrecy Act.  The result is contrary to Congressional intent and contradicts the Anti-Money Laundering Act’s important goals: modernizing the KYC process for both banks and the businesses they serve, and maximizing the usefulness of information for law enforcement.

Recommendations: FinCEN should explicitly reaffirm in the final rule that, consistent with the CTA, banks that choose to access information in the registry should expressly be permitted to rely on it for purposes of complying with FinCEN’s Customer Due Diligence requirements. BPI also recommends the following modifications to the proposed rule:

  • Significantly expand the scope of permitted use and inter-affiliate sharing by financial institutions of information obtained from the registry. Proposed limits would make the information less useful – for example, banks would be unable to use registry information in Suspicious Activity Reports, which would render them less helpful to law enforcement. FinCEN should design rules around banks’ use of the registry bearing in mind the context that banks must “know their customers” and already abide by rigorous customer due diligence and information security requirements.
  • Provide in the final rule that institutions may rely on registry information and are not required to verify reported ownership information or to identify, resolve or report discrepancies between that and other information. Only a reliable database can be useful to banks and law enforcement in targeting illicit activity. Other countries’ beneficial ownership registries provide valuable lessons that would discourage outsourcing verification to financial institutions.
  • Simplify and clarify requirements around accessing registry information, handling judicial process and obtaining customer consent.
  • Enable automated financial institution access to the registry. This step would enhance efficiency without affecting security or confidentiality.

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About Bank Policy Institute.

The Bank Policy Institute (BPI) 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 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

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Tara Payne

tara.payne@bpi.com

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