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US treasury publishes draft beneficial ownership reporting rule to tackle the use of shell companies

The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has published a draft rule which will implement the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA).

The Act requires beneficial ownership reporting by domestic and foreign corporations, limited liability companies and ‘similar entities’ created in, or registered to do business in, the US.

In implementing such provisions, the draft rule provides a series of clarifications:

  • beneficial owners are defined as any individual who exercises ‘substantial control’ or who owns or controls at least 25 per cent of the entity, also specifying the list of activities that could constitute substantial control;
  • entities within scope of the rule will have identify and report both their beneficial owners and the subject who has applied to form or register it to do business in the US;
  • Reports must contain beneficial owners and applicants’ name, date of birth, address and a copy of an acceptable identification document.

Such a collection of information is unprecedented in the US, as few states currently require legal entities to disclose information about their beneficial owners or the persons forming them. The resulting database will be manged by FinCEN and will not be publically accessible, but FinCEN will be authorised to disclose it to several categories of recipients, including federal law enforcement.

The rule also addresses the anti-money laundering risks posed by anonymous shell companies as set out in the US government’s new strategy on countering corruption.

SOURCE: https://www.fincen.gov