Acting Director Himamauli Das, Acting Director of the Financial Crimes Enforcement Network ("FinCEN") recently delivered remarks at the ACAMS AML Conference, held in Las Vegas.
He discussed the beneficial ownership information reporting rule, and FinCEN's focus on implementing the other elements of the Corporate Transparency Act ("CTA").
His remarks were noteworthy for the expectations he set for the timing involved with the remaining portions of the CTA that FinCEN must still implement.
Beneficial Ownership Information Reports
FinCEN only recently released the "reporting rule" under the CTA that will mandate how reporting companies must file their beneficial ownership information reports.
The reporting rule will take effect January 1, 2024. Every reporting company in existence on that date will have one year to file an initial report. Companies formed after that date will need to file an initial report within 30 days after they are formed.
The reporting rule is only the first step, however. FinCEN must also publish the "access rule" that will guide how law enforcement may access the data collected from beneficial ownership reports.
FinCEN must also define and launch its database and its API so that it has a place to accept and store information reports filed under the new law. Both of those efforts will be major undertakings with significant ramifications.
Expectations for FinCEN
In his remarks, Acting Director Himamauli Das said that FinCEN was working to finalize its draft of the access rule and that he expected it to be issued "in the near term."
With respect to the beneficial ownership reporting database and the technological implementation of the CTA, he said:
"In parallel with the rulemaking effort, FinCEN is developing the infrastructure to build a secure and confidential database that meets the highest security standards, and that ensures that only authorized users can access the information for authorized purposes. Security and confidentiality are incredibly important—to us and it's required by the Corporate Transparency Act. We expect the system to be operational by the time the reporting rule comes into effect.
Our tech teams meet regularly with our policy teams to methodically work through the interplay between the regulations and the tech build. We have gathered initial requirements and are completing system engineering, architecture, and program planning. The initial build of the cloud infrastructure and development environments are in progress."
A key phrase in this paragraph is the statement that he expects "the system to be operational by the time the reporting rule comes into effect."
Presumably he intended that to mean that there would be no delay in implementing the reporting rule, because the system would not be delayed. If, however, he is suggesting that the system will not be ready until January 1, 2024, that would be a big problem. Stakeholders will need to know the technical requirements of the database and the API well in advance of January 1, 2024 in order to launch reporting software that will marry with the FinCEN system.
FinCEN would benefit from having more transparency in its system development process, by publishing its interim work in a way that allows stakeholders to anticipate the shape and requirements of the final product.
About The Author
Jonathan Wilson is the co-founder of FinCEN Report Company with 31 years of experience in corporate, M&A and securities matters. He is the author of The Corporate Transparency Act Compliance Guide (to be published by Lexis Nexis in the summer of 2023) and the Lexis Practical Guidance Practice Note on the Corporate Transparency Act.