Monday, March 27, 2023

FAQ s & Other Guidance on Beneficial Ownership Issued By FinCEN

According to Law360, the Financial Crimes Enforcement Network issued its first guidance on reporting beneficial ownership information on Friday, March 24, 2023. This FAQ is a milestone under the Corporate Transparency Act's crackdown on the abuse of shell companies.

The guidance, which applies beginning Jan. 1, 2024 includes a 14-page document with answers to frequently asked questions, a summary of key filing dates, another summary of key questions and two videos aimed at informing more than 30 million businesses about the CTA's requirements. The law, passed in 2021, requires businesses to file reports on beneficial ownership in an effort to crack down on tax evasion, money laundering, sanctions evasion and illicit finance.

"We are committed to making this transparency process as simple as possible, particularly for small businesses who may have never heard of or interacted with FinCEN before," Himamauli Das, acting director of FinCEN, said in a statement Friday.

Erica Hanichak, government affairs director at the Financial Accountability and Corporate Transparency Coalition, or FACT Coalition, told Law360 on Friday that reporting templates that should have been relatively innocuous actually threaten to derail the CTA's entire agenda by giving reporting companies an unanticipated escape hatch. Companies would have the option to say they were "unable to obtain" or "unable to identify" either beneficial owners or company applicants, according to a draft intake form.

"In Allowing Entities To Check Those Boxes And Not Provide That Information, FinCEN Completely Bankrupts The Purpose And Intent Of The Statute To Require Mandatory Reporting
Of Beneficial Ownership Information,"
Hanichak Said.

Hanichak said the guidance released Friday was a good first step to let businesses know about their reporting obligations, but she said she hopes the agency will offer more in-depth guidance in the future covering topics like how entities with multiple layers that certain U.S. states facilitate will be affected. 

For Example, Wyoming Trusts, Delaware Trusts,
New Hampshire Foundations And Series LLCs Present
Complex Arrangements That Could Warrant Tailored
Guidance For Addressing Them,
According To Hanichak.

On March 15, a bipartisan group of five senators aired grievances to FinCEN about how access rules would hamper law enforcement with onerous requirements, a lack of verification processes, and a hamstringing of banks' ability to use the data for other regulatory checks. The American Bankers Association had raised the latter concern in February, saying banks would be prohibited from using the registry for sanctions enforcement, anti-fraud efforts and screening under the Bank Secrecy Act.

"As FinCEN has previously stated, we take feedback from public comments on FinCEN's proposed rule very seriously and are carefully considering all comments as we complete our work," Candice Basso, a spokesperson for the agency, told Law360 on Friday.

Have A Beneficial Ownership Problem?

     Contact the Tax Lawyers at
Marini & Associates, P.A. 

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