Tuesday, July 16, 2024
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Strengthening US national security and protecting our financial system

  • At the Beneficial Ownership Information Reporting Event in Tucson, Arizona.

By Andrea Gacki

First, FinCEN issues regulations to combat money laundering, terrorist financing, and other forms of illicit finance. Those regulations require that approximately 300,000 financial institutions report timely and accurate information under the Bank Secrecy Act regarding suspicious activity and certain transactions.

We then provide access to this information to law enforcement and other national security agencies. We also have teams of analysts who examine this reporting using advanced analytic tools and techniques to map illicit networks, identify trends and typologies, and isolate targets for investigations and enforcement. This helps law enforcement investigate serious crimes like narcotrafficking, human trafficking, fraud, and identity theft.

We also issue advisories to drive further reporting on priority risks to the US financial system and national security, and we host public-private events to discuss everything from ideas for improving our overall regulatory regime to details on criminal schemes and typologies.

Tomorrow, my team and I will participate in a counter-fentanyl information exchange here in Tucson with law enforcement agencies and financial institutions, where we will share typologies and approaches on combatting illicit fentanyl trafficking.

This exchange is part of an ongoing effort by FinCEN to collaborate at the local level in US cities that have been highly impacted by the opioid crisis. In December, the Department of the Treasury launched a Counter-Fentanyl Strike Force to bring together personnel, expertise, intelligence, and resources across key Treasury offices and is jointly led by the Office of Terrorism and Financial Intelligence at Treasury, where FinCEN resides, and IRS Criminal Investigation.

As part of the Strike Force, FinCEN launched a new initiative: The Promoting Regional Outreach to Educate Communities on the Threat of Fentanyl – or PROTECT program – which will be a nationwide series of meetings where local and regional banks and local, regional, and federal law enforcement can share information on illicit financial flows, including typologies and red-flag indicators of fentanyl-related activity, and discuss what types of information are particularly valuable when financial institutions report suspicious activity related to fentanyl.

I’m confident that we will see results from this new chapter of public-private information sharing, to help us all identify related illicit activity and enable the further disruption of fentanyl trafficking.

At FinCEN, we also employ various tools to hold illicit or noncompliant actors accountable. In addition to our rigorous support of civil and criminal investigations by other agencies, FinCEN imposes civil money penalties when US financial institutions fail to comply with the Bank Secrecy Act’s important mandate to protect national security and the integrity of our financial system.

We are also implementing the Anti-Money Laundering Act of 2020, including the Corporate Transparency Act, which is an important piece of the puzzle as we work to stop bad actors from exploiting the US financial system.

With this background in mind, I want to turn back to my original question: Why is it so important for small businesses to report beneficial owners, the real people behind their companies?

Terrorist financiers, drug kingpins, and other criminals use anonymous corporate structures to launder, move, and hide illicit funds into and through the United States. This dirty money undermines legitimate business activity and compromises U.S. economic and national security. Moreover, the effects of financial crime are detrimental to cities, towns, neighbourhoods, and families across America.

Human trafficking, fraud schemes, elder abuse, narcotraffickers, ransomware attackers, and other bad actors often rely on anonymous shell companies to facilitate these serious crimes. Examples of this can hit close to home. Just last month, a Mesa, Arizona individual received a prison sentence for his role as a leader in a transnational criminal organization that laundered sixteen-and-a-half million dollars in narcotics proceeds for the Sinaloa Cartel. According to the plea agreement, this person created a network of shell companies used to launder illicit bulk cash.

Corporate anonymity gives criminals a head start over law enforcement. Investigators must devote substantial time and resources to show who the real person is that controls or owns an entity. Criminals know about this advantage and use it to further enrich themselves and exploit the US financial system.

In 2021, Congress enacted the bipartisan Corporate Transparency Act, or CTA, to help law enforcement fight this illicit activity. The CTA peels back the layers of anonymity by requiring many companies doing business in the United States to report information to FinCEN about their beneficial owners – in other words, the real people who own or control them.

The information is housed in a secure, non-public database, and we’ve set rigorous standards around access and data-sharing to ensure that only authorized recipients can obtain beneficial ownership information. We are providing access to law enforcement and other partners in a phased approach to ensure this data is protected and fulfills the law enforcement and national security purposes laid out in the CTA.

I’d like to take a moment to discuss how it might help bring bad actors to account in the real world.

In 2018, the US Department of the Treasury’s Office of Foreign Assets Control, or OFAC – which administers and enforces economic sanctions – took action against a Russian oligarch named Suleiman Abusaidovich Kerimov that should have prevented him from benefitting from his assets in the United States. For approximately four years after this action, however, Kerimov continued to use a complex series of legal structures to continue to retain an interest in – and benefit from, his over $1 billion in assets in the United States.

These funds were invested in large public and private US companies and managed by a series of US investment firms and facilitators. Along the way, Kerimov and his proxies used various layers of shell companies, including LLCs, to conceal his interest. In 2022, OFAC publicly identified a Delaware-based trust that Kerimov was leveraging. Untangling this web of corporate structures allowed OFAC to ensure that Kerimov’s assets in the United States remain blocked and inaccessible to him.

Identifying this network required an extensive, multi-year enforcement investigation into Kerimov’s US holdings by OFAC. Beneficial ownership information reporting can make these types of investigations more efficient by providing a direct resource for law enforcement, national security, and intelligence officials. It can give law enforcement an advantage over illicit actors, diminish the head start that corporate anonymity provides, and ultimately level the playing field for legitimate American businesses.

But let me be clear. Small business owners doing their best to comply with the law should not lose sleep over these new reporting requirements. The CTA penalizes willful violations of the law, and this is where we plan to focus our enforcement actions. It’s not a “gotcha” exercise, and we’re not looking to needlessly burden America’s thriving small business community.

On the other hand, the illicit actors that the CTA targets -kleptocrats, criminals, money launderers, terrorist financiers, tax evaders, and others looking to manipulate America’s corporate system to hide their identities – should lose sleep over this law.

As more legitimate and law-abiding businesses comply with the requirements and report beneficial ownership information, bad actors will increasingly be forced into tough choices that jeopardize their ability to perpetuate crime undetected.

If they choose not to file, or if they file falsely, that may trigger an investigation. If they file true beneficial ownership information, they lose the anonymity that protects their criminal enterprise.

In other words, more transparency means fewer opportunities for bad actors to avoid detection, even when they think they’re hiding.

We recognize and celebrate that America’s small business community is vital to our economy. With that in mind, some ask why these reporting requirements apply to so many small businesses, but not bigger corporations. Indeed, the CTA exempts certain other types of businesses, including some large businesses, from its beneficial ownership reporting requirements.

In part, it’s because many of those big businesses are already disclosing their ownership structure in some way to other federal agencies. If you think of a big company like Amazon or Cox cable here in Arizona, they are already required to disclose information about those who own or control them to other financial regulators that supervise these companies, and indeed, are generally subject to greater regulatory scrutiny.

Nevertheless, we also know that running a small business is not easy. That’s why, in every step of implementing this law, we’ve considered small business owners and the potential burden that any regulation might impose on their day-to-day operations. Filing a report is easy and free of charge, and for companies with simple ownership structures, we estimate that it should take about 20 minutes. The majority of companies that are required to file should be able to complete the process without the help of an attorney or accountant. And it’s not an annual requirement: unless you need to update or correct information, beneficial ownership reporting is a one-time filing.

To successfully support law enforcement and other officials as they work to protect our national security and economy, it’s important for small businesses across the country to do their part. In terms of deadlines, most companies’ reports aren’t due until January 1, 2025. But we encourage you not to wait. The database is live and ready when you are. If you created or registered your business this year, in 2024, you have 90 days to file your initial report. Starting in 2025, every newly created or registered company must file within 30 days.

We have additional information about these deadlines and lots of guidance, FAQs, videos, and other materials to make compliance as easy as possible on our website, fincen.gov/boi – and we thank small businesses in advance for doing their part to help stop illicit finance.



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