The Director of the Financial Crimes Enforcement Network (FinCEN), Andrea Gacki, recently highlighted FinCEN’s initiatives to boost transparency in the U.S. financial system.
Beneficial Ownership Information Registry: Director Gacki described FinCEN’s launch of the beneficial ownership information registry (/boi), where small businesses can report information about their beneficial owners, i.e., individuals who ultimately own or control a company. Effective January 1, 2024, smaller U.S. companies, including non-publicly traded corporations and limited liability companies (LLCs), as well as certain foreign companies doing business in the U.S., are required to report this information. There are, however, twenty-three exemptions from the reporting requirement, including publicly traded corporations, corporations registered with the Securities and Exchange Commission (SEC), banks, nonprofits, and “large operating corporations” (a corporation that employs more than 20 full-time employees, conducts business at a location in the U.S. that it owns or leases, and filed a federal income tax return for the previous year showing more than $5 million in U.S. gross receipts or sales). A company is only required to report once, not yearly, unless its information changes. Penalties for willfully failing to report or attempting to provide false or fraudulent beneficial ownership information can be harsh, including civil penalties of up to $500 for each day that a violation continues, or criminal penalties of imprisonment for up to two years and/or a fine of up to $10,000 for a company’s senior officers.
Proposed FinCEN Rulemaking: FinCEN’s two recent notices of proposed rulemaking include:
Reporting requirements for investment advisers: A U.S. Treasury risk assessment of the investment adviser sector that oversees investment of tens of trillions of U.S. dollars into the U.S. economy found cases where “sanctioned individuals, corrupt officials, tax evaders, and other criminal actors” have used investment advisers as way to invest in U.S. securities, real estate, and other assets; and where U.S. adversaries, including China and Russia, have used investment advisers to invest in early-stage companies, allowing them access to sensitive information and emerging technology. Investment advisers are generally not subject to the Bank Secrecy Act (BSA) anti-money laundering and countering the financing of terrorism (AML/CFT) measures that currently require, for example, banks and other financial institutions to implement risk-based AML/CFT programs, file Suspicious Activity Reports (SARs) with FinCEN, and fulfill AML/CFT recordkeeping requirements. Investment advisers that would be covered by the new rule are those registered with the SEC (investment advisers that have over $110 million in assets under management (AUM)), and those that report to the SEC as exempt reporting advisers (ERAs) (investment advisers that advise only private funds and have less than $150 million in U.S. AUM, or that advise only venture capital funds).
AML regulations for residential real estate transfers: This proposed rule would require professionals involved in real estate closings and settlements to report to FinCEN information about non-financed transfers of residential real estate to legal entities or trusts (but not to individuals), including information about the beneficial owners of those entities or trusts. Director Gacki explained: “Illicit actors are exploiting the U.S. residential real estate market to launder and hide the proceeds of serious crimes with anonymity, while law-abiding Americans bear the cost of inflated housing prices.”
A FinCEN press release about Director Gacki’s attendance at the recent Financial and International Business Association’s (FIBA) annual anti-money laundering conference, with links to further information, can be found here: https://www.fincen.gov/news/news-releases/readout-fincen-director-gacki-encourages-transparency-us-financial-system-during
