At the end of March, FinCEN published an interim final rule that removes the beneficial ownership reporting requirements for U.S. companies and limits it to only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction. Comments are flowing in and they are not happy with the death of the Corporate Transparency Act.
Before its passage, the CTA garnered support from dozens of law enforcement and other stakeholders, including 42 state Attorneys General, the Fraternal Order of Police, and the National District Attorneys Association.
Two of the principals architects of the passage of the CTA submitted a damning condemnation of the interim final rule. Senators Whitehouse (D-RI) and Grassley (R-IA) submitted a comment to Treasury Secretary Scott Bessent raising concerns and expressing disagreement with the interim final rule.
“The Treasury Department’s decision to categorically exempt all U.S. persons and domestic entities from the CTA’s beneficial ownership information reporting requirements is inconsistent with the text and original policy goals of the CTA. We encourage you to rescind this interim final rule and fully implement the CTA so that law enforcement and national security agencies around the country have access to information necessary to prevent human trafficking, terrorist financing, border smuggling, drug distribution, sanctions evasion, and many other categories of criminal activity.”
Senators Whitehouse and Grassley were the original sponsors of the TITLE Act which was the precursor to the Corporate Transparency Act.
When I saw the interim final rule I questioned whether it would stand up to judicial scrutiny since it seems to ignore the text of the statute. If this rule stays in place it looks like there are groups that are willing to challenge it. I think the CTA is not quite dead yet.
Sources:
- Comments on Beneficial Ownership Information Reporting Requirement Revision and Deadline Extension
- Comment Letter from Senators Sheldon Whitehouse (D-RI) and Chuck Grassley (R-IA)
- Experts Warn US Treasury Rule Will Aid Criminal Shell Firms by Zdravko Ljubas
- Backlash Mounts as Treasury Issues Interim Final Rule Gutting Corporate Transparency Act
Doug, do you think the groups that want to preserve the CTA have standing to sue?
Gus – I suspect standing will be an issue in the fight to get the CTA back online. They will need to find the right plaintiff to file the case once the interim final is switched to just final. Who is an aggrieved party? Banks? Any financial institution expecting to get access to the BOI database to help with AML?