Lawmakers offer guidance, support for FinCEN rule on shell companies

A group of U.S. Congress members expressed their support for and offered guidance on a proposed rule by the Financial Crimes Enforcement Network (FinCEN) that would implement sections of the Corporate Transparency Act (CTA) to crack down on shell companies.

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“As the principal authors and Democratic negotiators of the CTA, we applaud FinCEN for proposing a strong, broad, and flexible rule that hews closely to the statutory text and to congressional intent,” the lawmakers wrote to Treasury Secretary Janet Yellen and FinCEN Acting Director Himamauli Das. “We recognize that the proposed rule does not cover a number of important issues that FinCEN has indicated will be covered by additional rulemakings — such as access to FinCEN’s beneficial ownership database and security and privacy protocols — and we look forward to working collaboratively with FinCEN on these additional rulemakings, implementing the remainder of the CTA.”

The letter was authored by U.S. Rep. Maxine Waters (D-CA), chairwoman of the House Committee on Financial Services; U.S. Sen. Sherrod Brown (D-OH), chair of the U.S. Senate Committee on Banking, Housing, and Urban Affairs; and U.S. Rep. Carolyn Maloney (D-NY), chairwoman of the House Committee on Oversight and Reform.

The letter goes on to identify areas where clarifications are required.

“However, we are concerned about one particular omission from the proposed rule’s definition of ‘ownership interest.’ The statutory definition of “beneficial owner’ explicitly states that an individual can own or control an ownership interest ‘through any contract, arrangement, understanding, relationship, or otherwise.’ This is critical because it will prevent bad actors from evading the beneficial ownership reporting requirement by owning or controlling ownership interests through informal means, such as an unspoken understanding or by virtue of the relationship between two individuals.”

The lawmakers urge FinCEN to bring the definition of “ownership interest” into conformity with the statutory requirements of the CTA by making it clear that any ownership interest in any reporting company can be owned or controlled “through any contract, arrangement, understanding, relationship, or otherwise.”