Fincen wants to publish its database access rule before year-end

WASHINGTON — Himamauli Das, acting director of the Financial Crimes Enforcement Network, said the agency is working to publish the second leg of its "beneficial ownership" rules in the coming days.

Speaking at an anti-money-laundering conference Tuesday, Das said the rule, which he termed a database "access" rule, "by the end of the year." 

The rule is part of the agency's required regulations pursuant to the recently passed Corporate Transparency Act. Signed into law in early 2021, the CTA is intended to prevent the U.S. financial system from being utilized for illicit activity and relieve banks of the burden of determining the true owners of anonymous shell companies. 

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The act requires certain businesses operating in the U.S. to disclose beneficial ownership data directly to Fincen, who will compile this information in a registry database. Law enforcement agencies will also be able to use this information to identify those engaged in illicit business activities.

Das said the agency will implement the CTA in three steps: a "reporting" rule, an "access" rule and a "due diligence" rule. Fincen issued its first "reporting rule," earlier this year, outlining which companies will be required to report beneficial ownership records, and establishes deadlines for doing so.

Das said in his comments this week that the second "access" rule will establish protocols for how law enforcement can access the newly created beneficial ownership database.

Das added that the agency submitted the rule to the White House Office of Management and Budget nearly a month ago, and the White House is working to issue it before the holidays.

The third and final rule revising banks' due diligence requirements "need[s] to be completed no later than one year after the effective date of the reporting rule. And we are working towards that goal."

This announcement should come as welcome news to lawmakers who have increasingly called for swift CTA implementation to crack down on Russian sanctions evasion.

In a bipartisan letter sent to Fincen in May, lawmakers said that the lack of a unified database of beneficial ownership records is hampering banks' and law enforcement's ability to track illicit funds that may help the Russian regime. 

"The Treasury Department presently lacks this information, underscoring the urgent need for beneficial ownership disclosure as required by the CTA to protect America's financial stability and national security," the lawmakers' letter said.

In addition to rooting out illicit financial transactions, supporters of the CTA hoped it would provide some regulatory relief for banks. Requiring individual companies to report beneficial ownership information directly to Fincen may shift some of that burden. But while Das's comments suggest Fincen is working to relax banks' due diligence requirements in line with the CTA, it remains unclear to what extent banks will feel any regulatory relief.