Next Hurdle in Treasury’s Corporate Transparency Push? Verification
12 May 2021

The U.S. Treasury Department last month kicked off the process of establishing a long-awaited corporate ownership registry. The agency is already facing sharply diverging views on how it should work.

Top of mind for financial institutions and other stakeholders is how ownership information that is submitted to the Treasury’s Financial Crimes Enforcement Network will be collected and verified, and who will have access to it.

The registry, which experts say could be years in the making, is supposed to help the U.S. crack down on the illicit use of anonymous shell companies. Congress outlined the parameters for the new database in a law passed in January, but it falls on FinCEN to work out the specifics. That includes defining who qualifies as an owner and which companies will be exempt from submitting information.

The first step is to write the regulations that will govern the database, a task FinCEN is supposed to complete by January. As part of that process, the agency has received more than 200 letters following an April request for input about those proposed regulations. It will have another two years to put the regulations it writes into effect.

A FinCEN spokeswoman said the agency is reviewing the comments it received.

In the letters, anticorruption advocates and groups representing financial institutions have pushed for expansive reporting requirements. Small business associations, meanwhile, have sought to keep the impending regulations more tailored and to minimize compliance costs for their members.

One significant rift: verification, and who should be responsible for it. Financial institutions and industry groups say the value of the registry will be limited unless basic steps are taken to ensure the information it holds is accurate. But state governments and small business associations generally oppose verification measures that would shoulder them or their members with extra costs or liability.

“Without that assurance [of accuracy], the information in the registry is unverified information which undermines the entire purpose for the registry,” the American Bankers Association wrote in a letter.

In another letter submitted to FinCEN, a senior financial crimes executive at U.K.-based bank HSBC Holdings PLC urged the agency to learn from the flaws of pre-existing corporate ownership registries in the U.K. and elsewhere. A common theme of such databases “is that data is held and maintained by a public body that lacks financial and human resources to effectively police the quality of the data,” the executive, Kevin Lampeter, wrote.

Fully auditing the accuracy of ownership information would likely be an enormous task for a small agency such as FinCEN, whose roughly 300 employees account for less than 1% of the Treasury’s workforce. But the ABA and others have urged the Treasury unit to implement measures that they claim wouldn’t constitute an extensive undertaking.

By Dylan Tokar, The Wall Street Journal, 11 May 2021

Read more at The Wall Street Journal

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