On December 8, the Financial Crimes Enforcement Network, or FinCEN, released its long-awaited proposed rule implementing critical elements of the Corporate Transparency Act (CTA). The CTA, which Congress passed in late 2020, is the most important change to the United States’ anti-money laundering laws in decades. Critically, the CTA requires that United States corporations report their real beneficial owners, who are the human beings who actually own and benefit from the corporation’s activities, to FinCEN. FinCEN’s new rule defines exactly which corporations have to report beneficial ownership information, the scope of the information to be reported, and how often the information would need to be reported. CREW submitted a comment on the original proposal calling on FinCEN to adopt broad standards to capture as much information as possible from these companies. The only way to meet the immense scale of the problem we face—where corrupt actors have funneled billions of untraceable, often illegal dollars into our country—is with bold, aggressive government action.
FinCEN’s proposed rule got it right. As CREW proposed, FinCEN adopted broad standards across the board, which will capture nearly every kind of corporation or legal entity that money launderers and corrupt actors use to funnel money into the United States. These improvements will finally give law enforcement the tools they need to pierce the currently impenetrable webs of empty and opaque corporations, called shell companies, that bad actors use to hide their assets. This rule is a huge first step towards ending the United States’ status as the world’s premier jurisdiction for housing money obtained from illegal or corrupt endeavors.
These improvements could not come at a more opportune moment. The devastating revelations in the Pandora Papers exposed the systemic failure of our anti-corruption laws. States like South Dakota have become havens for illicit cash, sheltering the assets of people like the president of a Dominican sugar corporation accused of a series of human rights abuses, with financial legal regimes based entirely on creating opaque and untouchable trusts and other corporate entities for the wealthy and the corrupt to shelter their assets from the government. These revelations demand a bold and innovative response. FinCEN’s rule is a critical first step in the right direction.
And this new rule isn’t the only reason for optimism. The same day, the Biden administration released their commitments to improving American democracy ahead of the international Democracy Summit that began December 9. A big part of the administration’s plan to fix our democracy is combating the malign influence of dirty money in American life and politics by making specific commitments to fixing our broken and outdated beneficial ownership laws. The success or failure of the administration’s anti-corruption project will hinge on whether the White House is prepared to take steps beyond the CTA, including creating a public registry of beneficial ownership information.
Taken together, FinCEN’s new proposed rule and the Biden administration’s commitment to combating the flow of illicit money into the country create a once in a generation opportunity to create a groundbreaking anti-corruption regime. CREW has been part of this fight since the beginning and we stand ready to continue to engage with the administration and Congress to develop this new system.