AML Compliance Solutions: FinCEN seeks input on rules for new UBO database

FinCEN issues Notice of Proposed Rulemaking re: UBO database due in 2024

The Financial Crimes Enforcement Network (FinCEN) recently issuedNotice of Proposed Rulemaking (NPRM) that would implement provisions of the Corporate Transparency Act (CTA) that govern the access to and protection of beneficial ownership information. The CTA and related rulemaking seeks to improve AML Compliance and the fighting of financial crimes that rely on anonymous shell companies to launder money.

The FinCEN draft rule proposes regulations that would govern the circumstances under which such beneficial-owner information may be disclosed to Federal agencies; to state, local, tribal, and foreign governments; and to financial institutions. FinCEN also proposes how the beneficial-owner data must be protected.

The proposed regulations specify how government officials would access beneficial ownership information in order to support law enforcement, national security, and intelligence activities. The proposed rules also describe how certain financial institutions and their regulators would access such information in order to fulfill customer due diligence (CDD/KYC) requirements and conduct supervision.

 The proposed rule also sets forth standards for protecting this sensitive information consistent with the goals and requirements of the CTA. The NPRM also proposes amendments to the final reporting rule to specify when reporting companies may report FinCEN identifiers associated with entities.

“The beneficial-ownership information reporting rule finalized earlier this year is a major step forward in unmasking shell companies and protecting the U.S. financial system from abuse by money launderers, drug traffickers, sanctioned oligarchs, and other criminals,” said FinCEN Acting Director Himamauli Das.

Das emphasized that FinCEN rulemaking aligns with the priority of securing the information and limiting access only to those intended and for purposes intended .

“In this next step, the proposed rule would provide the highest standards of security and confidentiality while ensuring that the new beneficial-ownership database is highly useful to law enforcement agencies in its efforts to combat financial crime,” Das said.

Das added that the purpose of the new rules is to fight financial crime and hinder passive support of devastating criminality: “As we drive toward full implementation of the Corporate Transparency Act, we move closer to exposing criminals, corrupt actors, and anyone trying to hide ill-gotten gains in the United States.”

This NPRM follows the final reporting rule that FinCEN issued on September 30, 2022, requiring most corporations, limited liability companies, and other similar entities created in or registered to do business in the United States to report information about their beneficial owners to FinCEN. Some sectors (like small businesses) have pushed back against the proposed rules and against the CTA overall.

Groups able to access beneficial-owner database under current rules

In accordance with the CTA’s requirements, FinCEN’s proposal limits access to beneficial ownership information to the following:

  • Federal agencies engaged in national security, intelligence, or law enforcement activities
  • State, local, and Tribal law enforcement agencies with court authorization
  • Financial institutions with customer due diligence requirements
  • Regulators supervising financial institutions for compliance with such requirements
  • Foreign law enforcement agencies, prosecutors, judges, and other agencies that meet specific criteria
  • Treasury officers and employees under certain circumstances

FinCEN further proposes to subject each category of authorized recipients to security and confidentiality protocols that align with the scope of the access and use provisions.

FinCEN strongly encourages all interested parties to submit comments on its proposals. Written comments on the NPRM should be submitted within 60 days following publication in the Federal Register on Dec. 16, 2022.


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