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Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules
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relevant government data, is expected to improve efforts to target illicit actors and their financial activities. The collection of BOI in a centralized database accessible to U.S. Government departments and agencies, law enforcement, tax authorities, and financial institutions may also help to level the playing field for honest businesses, particularly small businesses with fewer resources, that are at a disadvantage when competing against criminals who use shell companies to evade taxes, hide their illicit wealth, and defraud employees and customers.16
Since 2000, the Department of the Treasury, including FinCEN, has been raising awareness about the role of shell companies, their obfuscation of beneficial owners, and their role in facilitating criminal activity.17 In a 2006
report on the role of domestic shell companies in financial crime and money laundering, FinCEN found that shell companies enabled the movement of billions of dollars across borders by unknown beneficial owners, thereby facilitating money laundering or terrorist financing.18 Concurrently with the issuance of the report in 2006, FinCEN published an advisory alerting financial institutions to the money laundering risks involved in providing financial services to shell companies.19
In 2010, FinCEN, along with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance FinCEN the authority to implement, administer, and enforce compliance with the BSA and associated regulations Treasury Order 18001 Jan.
14, 2020.
16 FinCEN, Prepared Remarks of FinCEN Director Kenneth A. Blanco, delivered at the Federal Identity FedID Forum and Exposition, Identity: Attack Surface and a Key to Countering Illicit Finance, noting also that for many of the companies here todaythose that are developing or dealing with sensitive technologiesunderstanding who may want to invest in your ventures, or who is competing with you in the marketplace, would allow for better, safer decisions to protect intellectual property. September 24, 2019.
https www.fincen.gov/news/speeches/preparedremarks-fincen-director-kenneth-blanco-deliveredfederal-identity-fedid.
17 See, e.g., Suspicious Activity SAR Report Review Issue 1 October 2000 noting that SARS
filed in 2000 reflected suspicious wire transfer patterns involving shell companies that lacked legitimate business purposes and that were being used to transfer large amounts of funds, p. 11.
https www.fincen.gov/sites/default/files/shared/
sar_tti_01.pdf.
18 FinCEN, The Role of Domestic Shell Companies in Financial Crime and Money Laundering: Limited Liability Companies November 2006, available at https
www.fincen.gov/sites/default/files/shared/
LLCAssessment_FINAL.pdf.
19 FinCEN, Potential Money Laundering Risks Associated with Shell Companies November 2006, available at https www.fincen.gov/resources/
statutes-regulations/guidance/potential-moneylaundering-risks-related-shell-companies.

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Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Securities and Exchange Commission, and in consultation with the Commodity Futures Trading Commission, issued guidance clarifying and consolidating regulatory expectations at the time for obtaining BOI for certain accounts and customer relationships.20 The guidance noted that BOI in account relationships provides another tool for financial institutions to better understand and address money laundering and terrorist financing risks, protect themselves from criminal activity, and assist law enforcement with investigations and prosecutions.21
In 2006, the FATF 22 issued its Third Mutual Evaluation Report on AntiMoney Laundering and Combating the Financing of Terrorism, with respect to the United States 2006 FATF
Report. The 2006 FATF Report highlighted the United States lack of timely BOI available to relevant 20 FinCEN, FIN2010G001, Guidance on Retaining and Obtaining Beneficial Ownership Information March 5, 2010, available at https
www.fincen.gov/resources/statutes-regulations/
guidance/guidance-obtaining-and-retainingbeneficial-ownership. The CDD Rule and subsequent guidance and examination guidelines have superseded the 2010 beneficial ownership guidance.
21 Id., noting that heightened risks can arise with respect to beneficial owners of accounts because nominal account holders can enable individuals and business entities to conceal the identity of the true owner of assets or property derived from or associated with criminal activity.
Moreover, criminals, money launderers, tax evaders, and terrorists may exploit the privacy and confidentiality surrounding some business entities, including shell companies and other vehicles designed to conceal the nature and purpose of illicit transactions and the identities of the persons associated with them.
22 The FATF, of which the United States is a founding member, is an international, intergovernmental task force whose purpose is the development and promotion of international standards and the effective implementation of legal, regulatory, and operational measures to combat money laundering, terrorist financing, the financing of proliferation, and other related threats to the integrity of the international financial system. The FATF assesses over 200 jurisdictions against its minimum standards for beneficial ownership transparency. Among other things, it has established standards on transparency and beneficial ownership of legal persons, so as to deter and prevent the misuse of corporate vehicles. See FATF Recommendation 24, Transparency and Beneficial Ownership of Legal Persons, The FATF
Recommendations: International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation updated October 2020, available at https www.fatf-gafi.org/publications/
fatfrecommendations/documents/fatfrecommendations.html; FATF Guidance, Transparency and Beneficial Ownership, Part III
October 2014, available at https www.fatfgafi.org/media/fatf/documents/reports/Guidancetransparency-beneficial-ownership.pdf.

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stakeholders.23 Following this report, both the U.S. Senate and the U.S. House of Representatives introduced bipartisan legislation to establish a nationwide beneficial ownership registry. These initial beneficial ownership registry bills included the Incorporation Transparency and Law Enforcement Assistance Act, first introduced in the U.S. Senate in 2008 and in the U.S.
House of Representatives in 2010.24
FinCEN took its first major regulatory step to collecting BOI when it initiated the CDD rulemaking process in March 2012 by issuing an advance notice of proposed rulemaking ANPRM,25
followed by a NPRM in August 2014.26
FinCEN published the final CDD Rule in May 2016.27 The CDD Rule was the culmination of years of study and consultation with industry, law enforcement, civil society organizations, and other stakeholders, on the need for financial institutions to collect BOI and the value of that information. Citing a number of examples, the preamble to the CDD Rule noted that, among other things, BOI collected by financial institutions pursuant to the CDD Rule would: 1 Assist financial investigations by law enforcement and examinations by regulators; 2 increase the ability of financial institutions, law enforcement, and the intelligence community to address threats to national security; 3 facilitate reporting and investigations in support of tax compliance; and 4 advance Treasurys broad strategy to enhance financial transparency of legal entities.28
In December 2016, the FATF issued another Anti-Money Laundering and Counter-Terrorist Financing Measures, United States Mutual Evaluation Report 2016 FATF Report, and continued to note U.S. deficiencies in the area of beneficial ownership transparency. The 2016 FATF Report identified the lack of BOI reporting requirements as one of the fundamental gaps in the U.S. antimoney laundering/countering the financing of terrorism AML/CFT
23 Third Mutual Evaluation Report on AntiMoney Laundering and Combating the Financing of Terrorism, United States 2006, p. 237239, 299, 302, 305, 308 available at https www.fatf-gafi.org/
media/fatf/documents/reports/mer/
MER%20US%20full.pdf.
24 Incorporation Transparency and Law Enforcement Assistance Act, S. 2956 110th Cong.
2008, available at https www.congress.gov/110/
bills/s2956/BILLS-110s2956is.pdf; Incorporation Transparency and Law Enforcement Assistance Act, H.R. 6098 111th Cong. 2010.
25 77 FR 13046 March 5, 2012.
26 79 FR 45151 August 4, 2014.
27 81 FR 29397 May 11, 2016.
28 81 FR 2939929402.

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