Treasury to create database of business ownership to fight money laundering

Tens of millions of small U.S. companies will be required to provide the government with detailed information about their owners and other beneficiaries under a regulation finalized on Thursday aimed at stripping away layers of ownership that could hide illegally acquired assets.

The U.S. Treasury Department said it was working on creating a database that would contain the personal information of at least 32 million U.S. business owners as part of a crackdown on illegal financial activity. Treasury officials said the new rules represent a sea change in the area of ​​corporate transparency.

The rule comes as the United States and Western allies have been trying to sanction Russian oligarchs and wealthy friends since Russian President Vladimir Putin invaded Ukraine. Wealthy Russians are accused of hiding stolen money and assets in the United States and around the world.

“This rule will make it harder for criminals, organized crime gangs and other illegal actors to hide their identities and launder money through the financial system,” Treasury Secretary Janet Yellen said in a statement.

“This will help strengthen our national security and make it harder for oligarchs, terrorists and other global threats to use complex legal structures to launder money, traffic people and drugs, and commit other crimes that threaten harm to the American people,” she said. .

The rule would require most US businesses with fewer than 20 employees to register with the government starting Jan. 1. January 1, 2024. Treasury officials said the regulatory burden would be small, costing about $85 per business, but would provide a huge benefit to law enforcement. Small businesses are targeted because shell companies are often used to hide illicitly acquired assets and often have few employees.

The rule requires reporting companies to disclose information about those who own, control or create the company, including names, dates of birth, addresses, unique identification numbers on a driver’s license or passport, and images of documents.

The database will only be used by law enforcement and government agencies.

Ian Gary, executive director of FACT Coalition, a nonprofit that promotes corporate transparency, called the release of the new rules “a historic moment in the decades-long fight to eliminate dirty money in America.”

“The U.S. lags many jurisdictions in requiring disclosure of the true owners of companies and other entities,” Gary said.

More work needs to be done to fully implement the rule, Gary said.

The Treasury Department said it would seek subsequent rulemaking to address access to the database and other improvements to the new regulations.

The National Federation of Independent Business raised privacy concerns over the rule in February, saying the Financial Crimes Enforcement Network responsible for creating the database must provide the same protections for information that applies to other U.S. intelligence agencies.

The regulation implements the reporting requirements of the Corporate Transparency Act, which was enacted as part of the National Defense Authorization Act for fiscal year 2021.

The biggest impact of the database will be its use as a tool to help law enforcement, said Brian North, a business law attorney at Buchanan Ingersoll Rooney in Philadelphia.

“If an entity is used to avoid sanctions,” for example, he said, “the database would be used to provide information to the government to assist its law enforcement.”

–Associated Press

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