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Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules
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regime.29 The 2016 FATF Report also observed that the relative ease with which U.S. corporations can be established, their opaqueness and their perceived global credibility makes them attractive to abuse for money laundering and terrorism financing, domestically as well as internationally. 30 The Assistant Attorney General of the Criminal Division and Acting Assistant Attorney General of the National Security Division at the Department of Justice issued a statement following the publication of the 2016 FATF Report stating that full transparency of corporate ownership would strengthen our ability to trace illicit financial flows in a timely fashion and firmly declare that the United States will not be a safe haven for criminals and terrorists looking to disguise their identities for nefarious purposes. 31
While the CDD Rule increased transparency by requiring the collection of BOI by covered financial institutions at the time of an account opening, the Rule did not address the collection of BOI at the time of a legal entitys formation. Following the issuance of the 2016 FATF Report, Treasury and Department of Justice officials remained committed to working with Congress on beneficial ownership legislation that would require companies to report adequate, accurate, and current beneficial ownership information at the time of a companys formation. In addition, between the initial 2008
Incorporation Transparency and Law Enforcement Assistance Act 32 and the 2016 FATF Report, bipartisan beneficial ownership registry legislation continued to be introduced in each Congress. The introduction of the Corporate Transparency Act of 2017 in June 2017
in the U.S. House of Representatives and August 2017 in the U.S. Senate 33
followed the 2016 FATF Report. In November 2017, testimony at a Senate 29 See FATF, Anti-Money Laundering and Counter-Terrorist Financing Measures United States Mutual Evaluation Report 2016, p. 4 key findings and Ch. 7., available at https www.fatf-gafi.org/
media/fatf/documents/reports/mer4/MER-UnitedStates-2016.pdf.
30 Id., p. 153.
31 U.S. Department of Justice, Assistant Attorney General Leslie Caldwell of the Criminal Division and Acting Assistant Attorney General Mary McCord of the National Security Division, Financial Action Task Force Report Recognizes U.S. AntiMoney Laundering and Counter-Terrorist Financing Leadership, but Action is Needed on Beneficial Ownership, December 1, 2016, available at https
www.justice.gov/archives/opa/blog/financialaction-task-force-report-recognizes-us-anti-moneylaundering-and-counter.
32 See supra note 23.
33 Corporate Transparency Act of 2017, H.R. 3089
115th Cong. 2017; Corporate Transparency Act of 2017, S. 1717 115th Cong. 2017.

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Judiciary Committee hearing, Deputy Assistant Secretary of the Treasury Jennifer Fowler, head of the U.S. FATF
delegation during the 2016 FATF
Report, highlighted the significant vulnerability identified by FATF, noting that this has permitted criminals to shield their true identities when forming companies and accessing our financial system. She also remarked that, while Treasurys CDD Rule was an important step forward, more remained to be done working with Congress to find a solution to collecting BOI.34
Over the years, Treasury and Department of Justice officials repeatedly and publicly articulated the need for the United States to enhance and improve authorities to collect BOI.
In February 2018, Acting Deputy Assistant Attorney General M. Kendall Day testified at a Senate Judiciary Committee hearing on beneficial ownership reporting that the pervasive use of front companies, shell companies, nominees, or other means to conceal the true beneficial owners of assets is one of the greatest loopholes in this countrys AML regime. 35 In December 2019, FinCEN Director Kenneth Blanco noted that the lack of a requirement to collect information about who really owns and controls a business and its assets at company formation is a dangerous and widening gap in our national security apparatus. 36 He also highlighted how this gap has been addressed in part through the CDD Rule and how much more work needed to be done, stating that the next critical step to closing this national security gap is collecting beneficial ownership information at the corporate formation stage. If beneficial ownership information were required at company formation, it would be harder and more costly for criminals, kleptocrats, and terrorists to hide their 34 U.S.

Department of the Treasury, Testimony of Jennifer Fowler, Deputy Assistant Secretary Office of Terrorist Financing and Financial Crimes, Senate Judiciary Committee November 28, 2017, available at https www.judiciary.senate.gov/imo/media/
doc/Fowler%20Testimony.pdf.
35 U.S. Department of Justice, Statement of M.
Kendall Day, Acting Deputy Assistant Attorney General, Criminal Division, U.S. Department of Justice, Before the Committee on the Judiciary, United States Senate, for a Hearing Entitled Beneficial Ownership: Fighting Illicit International Financial Networks Through Transparency, presented February 6, 2018, p. 3, available at https www.judiciary.senate.gov/imo/media/doc/
02-06-18%20Day%20Testimony.pdf.
36 FinCEN, Prepared Remarks of FinCEN Director Kenneth A. Blanco, delivered at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference, December 10, 2019, available at https
www.fincen.gov/news/speeches/prepared-remarksfincen-director-kenneth-blanco-delivered-americanbankers.

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bad acts, and for foreign states to avoid detection and scrutiny. This would help deter bad actors accessing our financial system in the first place, denying them the ability to profit and benefit from its power while threatening our national security and putting people at risk. 37
Continuing its analysis of the use of shell and front companies to hide illgotten gains, in its 2018 National Money Laundering Risk Assessment, and in its 2018 and 2020 National Strategies for Combating Terrorist and Other Illicit Financing 2018 Illicit Financing Strategy and 2020 Illicit Financing Strategy, respectively, the Department of the Treasury discussed the money laundering risks inherent in the United States lack of a comprehensive beneficial ownership reporting regime.38 In the 2018 National Money Laundering Risk Assessment, Treasury highlighted a number of cases where shell and front companies were used in the United States to disguise funds generated in Medicare and Medicaid fraud, trade-based money laundering, or drug trafficking, among other crimes.39
In the 2018 Illicit Financing Strategy, Treasury flagged the use of shell companies by Russian organized crime groups in the United States, as well as the Iranian Governments use of shell companies to obfuscate the source of funds and its role as it tried to generate revenue.40 The 2020 Illicit Financing Strategy cited the lack of a requirement to collect BOI at the time of company formation and after changes in ownership as one of the most significant vulnerabilities of the U.S. financial system.41
Most recently, Congress enacted the Anti-Money Laundering Act of 2020
the AML Act, of which the CTA is a part.42 Congress explained that among 37 Id.
38 See e.g., id., p. 28, and U.S. Department of the Treasury, National Strategy for Combating Terrorist and Other Illicit Financing 2020 2020 Illicit Financing Strategy, pp. 1314, 27, 34, available at https home.treasury.gov/system/files/136/
National-Strategy-to-Counter-Illicit-Financev2.pdf.
39 U.S. Department of the Treasury, National Money Laundering Risk Assessment 2018, pp. 28
30, available at https home.treasury.gov/system/
files/136/2018NMLRA_12-18.pdf.
40 U.S. Department of the Treasury, National Strategy for Combating Terrorist and Other Illicit Financing 2018, pp. 20, 47, available at https
home.treasury.gov/system/files/136/national strategyforcombatingterroristandotherillicit financing.pdf.
41 2020 Illicit Financing Strategy, supra note 35, p. 12, available at https home.treasury.gov/
system/files/136/National-Strategy-to-CounterIllicit-Financev2.pdf.
42 The Anti-Money Laundering Act of 2020 was enacted as Division F, 60016511, of the William M. Mac Thornberry National Defense Authorization Act for Fiscal Year 2021, Public Law 116283 2021.

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