A Guide to Anti-Money Laundering for Crypto Firms

FinCEN Aims to Increase Beneficial Ownership Transparency

Regulation Knowledge & Training

The Financial Crimes Enforcement Network (FinCEN) has issued a new notice that aims to increase ownership transparency and target the use of shell companies that are used to hide the proceeds of crime.

Feedback has been invited on a Notice of Proposed Rulemaking (NPRM), which will implement the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA).

FinCEN says the proposal will help protect the US financial system “from illicit use and impede malign actors from abusing legal entities, like shell companies, to conceal proceeds of corrupt and criminal acts.” 

The new rules set out who must report beneficial ownership information, when they must report it, and what information they must provide. Access to this information would be given to law enforcement, financial institutions, and other authorized users. 

“FinCEN is taking aggressive aim at those who would exploit anonymous shell corporations, front companies, and other loopholes to launder the proceeds of crimes, such as corruption, drug, and arms trafficking, or terrorist financing,” said Acting FinCEN Director Himamauli Das.

The CTA is a key pillar of the Anti-Money Laundering Act (AMLA) of 2020, which established UBO information reporting requirements for certain types of corporations, limited liability companies, and other similar entities. The proposed rule implements these reporting requirements. 

The NPRM reflects an ongoing commitment by the Biden administration to curb corruption. The administration’s ‘Summit for Democracy’ in early December was structured around three key priorities, including beneficial ownership transparency. 

At the summit, US Treasury Secretary Janet Yellen indicated that the US has a major problem with illicit funds: “In the popular imagination, the money-laundering capitals of the world are small countries with histories of loose and secretive financial laws. But there’s a good argument that, right now, the best place to hide and launder ill-gotten gains is actually the United States. And that’s because of the way we allow people to establish shell companies.” 

The proposed rule reflects concerns in the newly released US Government Strategy on Countering Corruption, which addresses money laundering risks posed by anonymous shell companies, as well as the need to protect the international financial system from abuse.

It is also consistent with the efforts of the Financial Action Task Force (FATF) to make changes to its beneficial ownership guidance following the Pandora Papers leak, and of G7 and G20 leaders to curtail the ability of illicit actors to hide wealth behind anonymous shell companies. 

Written comments for the NPRM are due by February 7th, 2022, and firms should look out for further updates from FinCEN on this subject, as this is the first of three announcements that FinCEN plans to implement as part of the CTA. The other two will involve establishing rules for who can access beneficial ownership information (BOI), for what purposes, and what safeguards will be required to ensure that the information is secured and protected; and a revision of its CDD rule following the announcement of the BOI reporting final rule. In addition, FinCEN is developing the infrastructure to administer these requirements, such as a beneficial ownership information technology system.

A fact sheet issued by FinCEN is a useful resource for compliance staff, providing a breakdown of the key points in the notice. 

Explore the context behind FinCEN’s beneficial ownership announcement with our Guide to US Anti-Money Laundering Act.

Originally published December 16, 2021, updated December 16, 2021

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