FinCEN has announced that it will not issue any fines or penalties, or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports, pursuant to the Corporate Transparency Act (CTA) by the current deadlines.

The agency said it would not act until an interim final rule becomes effective and the new relevant due dates in the interim final rule have passed. It intends to issue, by no later than March 21, an interim final rule that articulates a new rule and extends BOI reporting deadlines.

FinCEN said it recognizes the need to provide new guidance and clarity soon, while also ensuring BOI that is highly useful to important national security, intelligence, and law enforcement activity is reported.

Background

The CTA requires FinCEN to obtain information on the true owners of corporations and LLCs formed in the United States, and to set up a database to help law enforcement, national security officials, and – with customer consent – financial institutions access that information when necessary. 

Limited liability companies and statutory trusts were examples of those reporting companies that the original law would now require to submit such information.

In the near term, this most recent announcement most of all showcases the US government’s intention to reduce regulatory burdens on businesses. And it demonstrates at least some commitment to the CTA’s reporting of BOI for those entities that pose the most significant law enforcement and national security risks.

Detail

But the details will be interesting to read. And that’s because the CTA was a truly bipartisan piece of legislation. The lawmakers spearheading it had stressed the need to collect more – and not just a tiny piece – of BOI to support efforts to root out anti-money-laundering, terrorist financing and other illegal endeavors using disguised ownership details.

Senator Mark Rubio (R-FL) first introduced the bipartisan Corporate Transparency Act with Senator Ron Wyden (D-OR) in August 2017. In August 2018, Senators Rubio, Wyden, and Sheldon Whitehouse (D-RI) secured bipartisan legislation to lay the groundwork to expand a Treasury initiative to curb foreign nationals laundering money through high-end real estate.

And in May 2021, Rubio and colleagues sent a bipartisan comment to FinCEN urging the efficient, effective implementation of a beneficial ownership reporting system, as required by the CTA.

In December, a Texas judge blocked the implementation of the law, and on February 17 this year, the US District Court for the Eastern District of Texas stayed that nationwide preliminary injunction, blocking its enforcement, re-opening the gates for the CTA to be enforced and collected for FinCEN’s national registry.

“We’re closing a loophole and sending a clear message: The United States is not a haven for dirty money,” said Janet Yellen, former US Treasury Secretary, just before she left her role.

Work in progress

FinCEN also said in this most recent announcement that it intends to solicit public comment on potential revisions to existing BOI reporting requirements.

FinCEN said it will consider those comments as part of a notice of proposed rulemaking anticipated to be issued later this year to minimize burden on small businesses and determine what, if any, modifications to deadlines should be considered.

Outside the executive branch, there’s plenty happening in Congress and the courts regarding the CTA.

A bill introduced in the US House on February 11 would extend the deadline for entities created before January 1, 2024, to file their initial BOI report to January 1, 2026. And a bill previously introduced in the Senate on January 15 would repeal the CTA in full. (The name of the bill is “The Repealing Big Brother Overreach Act,” and it is being sponsored by Rep. Warren Davidson (R-OH).)

And several courts across the country are considering cases challenging the CTA on constitutional grounds.

In a nutshell, the February 27 announcement from FinCEN basically points back to various calls from affected parties that more time and guidance is needed to lessen the burden on lower-risk entities pertaining to BOI reporting.

As the situation remains fluid, compliance teams should closely monitor ongoing developments and consider submitting comments and questions to FinCEN related to BOI reporting, while they have FinCEN actively listening.