The Corporate Transparency Act – Help Is on The Way
The Corporate Transparency Act – Help Is on The Way (But It’s Still A Long Way Off)
On May 11, 2018, financial institutions were required to comply with the final CDD rule issued by the Financial Crimes Enforcement Network (FinCEN) which required the institutions to collect CIP and identification for beneficial owners and one control manager for legal entities as defined by the rule. In the lead-up to May 2018, financial institutions worked with core and AML model vendors to ensure the required information could be entered and stored; provided ongoing training to frontline personnel, who would be required to request even more information at account opening; and, educated customers regarding the requirements in an effort to minimize customer pushback. While FinCEN’s intention was always to promote transparency in entity ownership and minimize illicit activity, financial institutions felt the operational, expense, and customer experience burdens of carrying out this intention. Many asked why individual states, or even FinCEN itself, couldn’t be tasked with creating a centralized database for information collection rather than placing the responsibility with the institutions which are already responsible for so much under BSA, OFAC, and USA PATRIOT Act requirements. After several years (and headaches on the part of BSA Officers everywhere), the centralized database is finally on the horizon – a distant horizon.
The Corporate Transparency Act (CTA), which provides for the development and implementation of a centralized FinCEN-driven beneficial ownership registry, was announced in 2021 causing BSA Officers to put the bottles of aspirin down . . . until the questions started to pop up. Will we be able to stop collecting beneficial ownership information? Will we be expected to verify our information against the registry? What happens when our information and the registry’s information don’t match – SAR filing, account closure, FinCEN notification? Will customers now have to enter the information in the registry while also providing it to us – how does this help the customer experience? And, perhaps, the most important question – will FinCEN validate the information reported to the registry by entities so the information may be relied upon? All questions remain valid and largely unanswered as the CTA currently lives in the proposal phase.
While the CTA and the long-awaited registry are dots on the horizon in these early days of 2022, financial institutions and BSA Officers can do two things:
- Continue to follow the final CDD rule requirements. Beneficial ownership information must continue to be collected (even in the interim rule phase once we get there) and regulators will verify that no changes have been made based solely on the promise of the registry.
- Provide commentary on the proposals. Institutions should submit any questions and concerns over the rollout of the CTA via commentary to ensure FinCEN can make well-informed decisions designed to cause as little upheaval and burden on institutions as possible while retaining the integrity of the CTA’s intent.
There is certainly enough on our to-do lists for BSA compliance to keep us busy until the registry becomes a reality, but ensure bank-wide personnel understand there are no imminent changes expected and make your voice heard through providing proposal commentary. And keep the aspirin nearby!