Treasury Under Secretary for Terrorism and Financial Intelligence Brian Nelson and Financial Crimes Enforcement Network (FinCEN) Director Andrea Gacki participated in a beneficial ownership reporting outreach event in Columbus, Ohio, in partnership with Rep. Joyce Beatty (D-OH) last week.

They discussed the Corporate Transparency Act (CTA) – a bipartisan law enacted to curb illicit finance by supporting law enforcement efforts under which many businesses are required to report basic information to the federal government about the real people who ultimately own or control them – or beneficial ownership information.

The event was part of Treasury’s nationwide efforts to educate reporting companies on the aims of the beneficial ownership information program prior to the January 1, 2025, reporting deadline that many companies are required to meet. The enforcement leaders spoke to and met with business representatives to discuss the reporting requirements, focusing on how illicit finance enables other crimes to proliferate, especially money laundering involving illicit drugs and terrorist financing.

Their main message: As the world’s largest economy, the US has a unique responsibility to uphold certain best practices and lead by example in fighting illicit finance and eliminating havens for dirty money.

Gacki: BOI in action

The CTA, passed in 2021, is meant to peel back the layers of anonymity by requiring many companies doing business in the US to report information to FinCEN about their beneficial owners – the real people who own or control them, Gacki said in her prepared remarks.

“The information provided to FinCEN is housed in a secure, non-public database, and we’ve set rigorous standards around access and data-sharing to ensure that only authorized recipients can obtain beneficial ownership information and only for authorized purposes,” she continued.

She then related a compelling story of how beneficial ownership information can help bring bad actors to account in the real world.

In 2018, the US Treasury’s Office of Foreign Assets Control (OFAC) took action against a Russian oligarch named Suleiman Kerimov that should have prevented him from benefitting from his assets in the US.

“Along the way, Kerimov and his proxies used various layers of shell companies, including LLCs, to conceal his interest.”

FinCEN Director Andrea Gacki

When the US took this action, it should not only have blocked Kerimov’s assets in US jurisdiction, but also prevented all US persons from dealing with Kerimov and any businesses he owned, she said. Because, for approximately four years after the US imposed sanctions on him, Kerimov used a complex series of legal structures to continue to retain an interest in, and benefit from, his over $1 billion in assets in the US.

“Kerimov’s funds were subsequently invested in large public and private US companies and managed by a series of US investment firms and facilitators. Along the way, Kerimov and his proxies used various layers of shell companies, including LLCs, to conceal his interest,” Gacki said.

In 2022, after a tedious investigation, OFAC publicly identified a Delaware-based corporate network that Kerimov was leveraging and finally blocked over a billion dollars of Kerimov’s assets.

“Untangling this web of corporate structures allowed OFAC to ensure that Kerimov’s assets in the United States remain blocked and inaccessible to him,” she said.

Beneficial ownership information reporting can make these types of investigations more efficient by providing a direct resource for law enforcement, national security, and intelligence officials by diminishing the head start that corporate anonymity provides, Gacki said.

Nelson: Closing loopholes

At the event, Nelson gave a prepared speech in which he mentioned the Biden-Harris Administration’s first-ever US Strategy on Countering Corruption, issued in December 2021, explaining how the Treasury Department is prioritizing regulatory actions necessary to curb illicit finance by increasing transparency and detecting and deterring serious crimes like narcotrafficking, fraud, terror financing, and corruption.

He said “[w]e know that running a business is not easy, and we’ve taken into account feedback and comments about the potential burden of these new regulations.”

To that end, he says the department’s efforts to reduce potential business burden are rooted in extensive research, so they can tailor regulations to the most salient threats, and that the agency offers their risk assessments to the public.

Earlier this year, Treasury published its Money Laundering, Terrorist Financing, and Proliferation Financing Risk Assessments, which highlight the significant illicit finance threats, vulnerabilities, and risks facing the US.

And it is taking concerted steps to close certain loopholes, such as stopping and detecting illicit actors exploiting American real estate to launder or park the proceeds of corruption, drug trafficking, and other illicit activity. Nelson noted that, in one study, it was estimated that at least $2.3 billion in illicit funds flowed through the US real estate market from 2015 to 2020. 

“Earlier this year, consistent with our Congressional mandate under the Bank Secrecy Act, Treasury issued a proposal … to require more transparency for residential real estate transfers involving legal entities and trusts, which would support law enforcement as they investigate illicit activity. We are working expeditiously to publish a final rule,” Nelson said.