The bill would also require FinCEN to disclose the information to other governmental agencies and financial institutions on request.
After adopting several amendments, the House committee approved the revised bill by a vote of 43 to 16. The revised bill now moves to the full House for further consideration.
In a May 6 letter to the House Financial Services Committee, ABA President Robert Carlson explained that while the ABA supports reasonable and necessary domestic and international measures to combat money laundering and terrorist financing, the ABA opposes H.R. 2513 for several reasons.
First, the bill’s reporting requirements, combined with its broad and confusing definition of beneficial owner, would be costly, burdensome on legitimate businesses and their lawyers, and subject them to harsh criminal and civil penalties for essentially paperwork violations.
Second, the bill raises serious privacy concerns for small businesses and the many individuals who would be designated as beneficial owners. The bill would require FinCEN to maintain sensitive personal information in a large government database and disclose it on request to any federal, state, tribal, or local governmental agency or to any foreign law enforcement agency if certain conditions are met. FinCEN would also be required to disclose the beneficial ownership information to financial institutions in many cases, thereby increasing the risk that personal information could be exposed
Third, the bill’s burdensome beneficial ownership reporting requirements are unnecessary and duplicative because the federal government already has other, more effective tools to fight money laundering and terrorist financing.
Since FinCEN’s Customer Due Diligence (CDD) Rule took effect in May 2018, banks and other financial institutions have been required to collect beneficial ownership information regarding entities that establish new accounts. Other FinCEN regulations also require financial institutions to collect or update beneficial ownership information on certain existing account holders where the institution detects an increase in the customer’s risk profile. Therefore, FinCEN already has access to information about the key individuals who own or control most business entities with a new account or with an existing account and an elevated risk profile. In addition, since 2010, the IRS has required every business with at least one employee to submit IRS Form SS-4, which includes the name of a “responsible party” within the business who is able to control, manage, or direct the entity.
Together, FinCEN’s CDD rule and other regulations, combined with the IRS’ SS-4 Form, provide the federal government with access to substantial beneficial ownership information on almost every business entity in the United States. Therefore, it is unnecessary to create a duplicative new regulatory regime that would impose unfair burdens, excessive costs, and the risk of severe civil and criminal liability on millions of small businesses and their lawyers.
In addition to the House bill, similar draft legislation known as the “ILLICIT CASH Act” was released on June 10 by Sen. Mark Warner (D-VA). The Senate Banking, Housing, and Urban Affairs Committee has scheduled a hearing on the collection of beneficial ownership information for June 20.
If you would like to receive more information on the legislation or assist the ABA in opposing it, please visit the Grassroots Action Center and register for the Grassroots Action Team here.