On May 6, 2024, the Financial Crimes Enforcement Network (“FinCEN”) Director Andrea Gacki, Acting Chief of the Enforcement Division Steve Hsieh, Acting Associate Director of the Policy Division James Martinelli, and other key industry leaders, convened at SIFMA’s Anti-Money Laundering and Financial Crimes conference in New York to discuss, among other things, FinCEN’s priorities for the Corporate Transparency Act (“CTA”).

Data Governance for Reporting Companies

A key regulatory enforcement priority for FinCEN is data governance.  Reporting beneficial ownership information (“BOI”) to FinCEN is an ongoing obligation, and documentation of key decisions along the way is vital, especially for complex entities and those which qualify for one of the exemptions to the reporting requirements of the CTA.  In terms of corporate formation, building in BOI reporting obligations and reporting will be essential, as new entities only have 90 days to report this information to FinCEN.  FinCEN expects legal entities to set up a framework to ensure both initial and ongoing compliance with the Act.

Outreach

FinCEN emphasized the importance of minimizing the burden on entities required to report BOI.  To promote compliance, FinCEN has engaged in an outreach campaign to educate small businesses and other entities required to report BOI under the rule, including conducting virtual webinars, partnering with financial institutions to educate their customers about reporting obligations, publishing multiple FAQs, and publishing the Small Entity Compliance Guide.  FinCEN is also working on publishing guidance in the form of a pamphlet that financial institutions can distribute to their customers.  FinCEN’s stated goal of its communications campaign is to ensure compliance and emphasized that the CTA only punishes willful conduct.  To date, FinCEN has already received more than 1.7 million BOI reports.

State Challenges to the Rule

While state challenges to the CTA struck a chord with regulators and industry leaders, FinCEN believes the CTA will stay intact, at least in some capacity.  In this regard, FinCEN emphasized the importance of keeping abreast of reporting requirements and potential regulatory changes in the coming months.

Access to BOI

FinCEN is continuing its phased approach to providing access to BOI, but a lot of open questions remain and FinCEN is still evaluating new pieces of guidance.  Particularly relevant to financial institutions, FinCEN significantly expanded both the types of financial institutions that will have access to BOI and how that information may be used, including complying with the Customer Due Diligence (“CDD”) rule, SAR reporting, and complying with OFAC sanctions regulations.  FinCEN noted, however, that at the initial stages of access, only financial institutions with CDD obligations will have access to reported BOI, though FinCEN reserves the right to expand access.

Industry leaders highlighted best practices to ensure compliance with the CTA and prepare for accessing the BOI database, including:

• Creating steering committees to discuss client consent to access and inadvertent disclosures;
• Allocating funds to set aside for technology builds;
• Establishing protocols for use of the BOI reported in the database, including gaining comfort with the accuracy of the information and handling discrepancies with what was provided by the client at account opening; and
• Creating compliance and control processes to ensure strict access.