The U.S. Treasury Department, as part of its efforts to combat corruption and terrorism, proposed a new rule Tuesday that requires companies to identify who owns and controls them, rather than the names of the people who formed the company.
Shell companies have been used to mask people’s identities in ways that can enable illegal activities, causing the federal government to seek greater transparency as part of last year’s Anti-Money Laundering Act, which included the Corporate Transparency Act. The Treasury Department estimates that the average costs of compliance will be roughly $50 for companies.
The proposal, which was developed by the Financial Crimes Enforcement Network, will “help close the loopholes that undermine U.S. national security, bolster economic fairness, and protect the integrity of our financial system,” Treasury Secretary Janet Yellen said in a statement.
Companies would be required under the proposal to disclose any “beneficial” owners. These people either exercise “substantial control” over the company or own in some form at least 25 percent of the company, according to a summary of the rule. Some trusts would be excluded from having to submit their ownership structures because their creation did not require them to file with state government officials.
There will be a 60-day comment period on the proposed rule.
The proposal would implement reporting provisions of the Corporate Transparency Act, bipartisan legislation that was supported by the banking industry, including the American Bankers Association and the Independent Community Bankers of America, to remove burdens from banks required to collect this information.
Financial institutions and law enforcement agencies are among the users that will have access to beneficial ownership information. FinCEN said additional rulemaking would be needed, including to establish guidelines for accessing beneficial ownership information.
ICBA said in a statement today that it would continue to “advocate relieving community banks of collecting this information from their customers.”
Banker & Tradesman staff writer Diane McLaughlin contributed to this report.
