The House Financial Services Committee held a hearing to examine FinCEN’s progress on the rollout of the Corporate Transparency Act. Newly-appointed FinCEN Director Andrea Gacki will have her work cut out for her.
Proposal to Delay Implementation of the Corporate Transparency Act
Frustrated with FinCEN’s slow progress, Republicans on the Committee, led by Chair Blaine Luetkemeyer, have proposed legislation that would delay the implementation of the Corporate Transparency Act until FinCEN completes all three of its rulemaking programs and the Treasury Secretary certifies to Congress that all three rules will take effect on the same date. Proposed House Resolution 4035, entitled the Protecting Small Business Information Act of 2023, would delay the implementation of FinCEN’s final rule on beneficial ownership reporting until FinCEN also finalizes its regulations on the Access Rule and its not-yet-commenced rulemaking that would harmonize its BOI reporting regime with the customer due diligence rules applicable to banks and financial institutions.
Many had raised concerns with FinCEN’s regulations, including:
- FinCEN’s proposed form of beneficial ownership report allowed a reporting company to state that it “did not know” certain information fields
- FinCEN’s rule-making approach split the CTA into three separate rulemaking efforts, instead of one, allowing its Beneficial Ownership Rule to take effect on January 1, 2024, while its regulations on the Access Rule and the Bank CDD Rule were still in process
- FinCEN’s proposed Access Rule restricted the ability of banks to view BOI Reports filed by their customers
- FinCEN’s public education efforts had arguably fallen short
Blaine Luetkemeyer’s Remarks
Chair Luetkemeyer prefaced the hearing with remarks to the Committee, which are noteworthy:
Today’s hearing focuses on Beneficial Ownership, and the Financial Crimes Enforcement Network, otherwise known as FinCEN’s, rulemaking required by the Corporate Transparency Act.
Beneficial ownership information reporting has been touted as one of the most important national security tools. Yet no one knows anything about it.
It is my hope that today’s hearing will not only inform our constituents of this forthcoming rule but will shine light on the ways the Treasury Department and FinCEN have distorted the purpose of this rulemaking.
However, before we dive into the weeds, it is important to set the stage.
Some of my colleagues across the aisle today may insinuate that Committee Republicans never supported Beneficial Ownership, and our actions since the passage of the CTA were carried out to undermine the legitimacy of the final rule.
Nothing could be further from the truth.
I personally worked with Former Congresswoman Carolyn Maloney on an earlier iteration of the CTA. This bill, while not identical to the final CTA, was founded on the same principles.
On one hand, Federal law enforcement and our local sheriffs were banging down our doors warning about the ways in which bad actors were hiding illicit profits in shell companies.
On the other, small, medium, and large banks alike were frustrated with burdensome regulation without any feedback from the government.
To fix this problem, Chair Maloney and I decided to shift the burden from the banks and place it on the Federal government.
If law enforcement and FinCEN wanted the information seamlessly, they would need to be responsible for its collection.
Since that initial bipartisan attempt, the CTA changed slightly but never lost its foundational principle: if the U.S. government wants the information, the U.S. government should be responsible for it.
Now we find ourselves in a precarious situation. We are less than six months away from the CTA’s effective date of January 1, 2024, and we are left with more questions than answers.
In an effort to prepare for today’s hearing, I joined a letter in June with Chair McHenry, Chair Williams, and Chair Womack expressing our concerns with FinCEN’s rollout of the Beneficial Ownership plan.
This letter asked some important questions about how FinCEN plans to educate 32.6 million small businesses about their new obligations.
This should not have been a difficult letter to respond to.
With less than six months to go, the education plans should be completed and ready to roll out well before the system goes live in January.
Disturbingly, despite the Committee’s request for information on the education and roll out strategy, there has been no response.
The education issue, while it may seem trivial to those not paying attention, is indicative of the larger issues with the BOI rulemaking process. “FinCEN and main Treasury have transformed a simple-to-follow filing system into complex maze leaving many scratching their heads.
As I am sure we will hear from our witnesses, FinCEN is asking for more money and more resources, but time and time again they favor complexity over straightforwardness.
Complexity that will result in small business owners needing to hire lawyers to figure out simple things like if they need to file.
This rulemaking process must be corrected. Our constituents deserve better than what FinCEN has put forward thus far. “I do not see how FinCEN can move forward with a January 1 BOI effective date without having a plan. I ask all of my colleagues to remember that if this filing system is not seamless, it is our small businesses picking up the pieces from COVID that will suffer.
We need FinCEN to do better, and today’s hearing shall be a start in outlining what that could look like.
Much work remains to educate the business public about the CTA and its upcoming filing deadlines.
Whether Chairman Luetkemeyer can persuade Congress to adopt new legislation is another matter. Even if the Republican-majority House of Representatives adopted legislation, getting the bill passed in the Senate, where Democrats hold a slim majority (in the Summer before a Presidential election) will be a daunting task. FinCEN and its supporters would do well to redouble their efforts to complete a small business guide to the CTA as part of a public education campaign to demonstrate their desire to ensure a smoother rollout of the CTA.
