House Republicans Blast FinCEN, Aim to Delay Beneficial Ownership Rule

CUNA and NAFCU have both expressed concern over proposal’s potential impact on credit unions.

With only six months until it is supposed to be implemented, the Financial Crimes Enforcement Network (FinCEN) does not have a plan to roll out a new rule requiring companies to report their true ownership to federal officials, Republican members of Congress said last week.

As a result, House Financial Institutions Committee Chairman Rep. Patrick McHenry, R-N.C., on Monday said he planned to introduce legislation to delay the rule.

Under current rules, financial institutions collect ownership information when an account is opened. However, in 2020, Congress enacted new anti-money laundering provisions that, among other things, placed the onus on companies themselves to report their ownership to federal officials.

Letter From Republicans

“It is concerning that with six months until its effective date, FinCEN has yet to lay out a clear plan for engagement,” four House Republicans, including McHenry, wrote to Treasury Secretary Janet Yellen and FinCEN Acting Director Himamauli Das. “It is highly unlikely that the 32 million small business owners know what FinCEN is let alone know to look for a press release on FinCEN’s website.”

That lack of information could leave companies criminally vulnerable because they have not filed the required information, according to the four representatives—which also included Roger Williams, R-Tx., chairman of the House Small Business Committee; Blaine Luetkemeyer, R-Mo., chairman of the Financial Services Committee’s National Security subcommittee and Steve Womack, R- Ark., chairman of the House Appropriations Committee’s Financial Services subcommittee.

McHenry said Monday that his legislation would delay implementation of the rule until other anti-money laundering regulations are ready for implementation.

Backstory and Context

Last month, Das told the Financial Services Committee that FinCEN officials are reviewing all of the comments they received on implementation of the new rule and that they remain “committed to reaching a final regulatory framework that balances complete reporting and efficient access with ensuring the security and confidentiality of the information in the beneficial ownership database, consistent with the goals and requirements” of the law.

McHenry took a shot at Das on Monday, announcing that he also was introducing legislation that would require Senate confirmation of the FinCEN director. Under current law, the director is not subject to Senate confirmation.

Meanwhile, a review of congressional and credit union trade group correspondence on the beneficial ownership proposal signals general dissatisfaction with how the rule is being implemented.

In April, a bipartisan group of lawmakers, including McHenry and Senate Banking Chairman Sen. Sherrod Brown, D-Oh., accused the Treasury Department of proposing an “escape hatch” that would allow businesses to check a box stating that its beneficial owners could not be identified.

The law “does not allow for reporting companies to avoid transparency,” they wrote. “Unfortunately, the form as described in FinCEN’s current Notice does allow for that avoidance.”

Response From Credit Union Groups

By the same token, credit union trade groups have weighed in on FinCEN’s efforts to implement the beneficial ownership rule.

In March, Aminah Moore, NAFCU’s senior regulatory affairs counsel, said the group also is concerned about the ability of some companies to refuse to disclose their beneficial owners.

“The option to not answer questions invites bad actors to operate under the radar by not reporting this information because they are able to claim that it is unknown,” Moore wrote in a letter to FinCEN officials, commenting on implementation plans.

“Credit unions are expecting to rely on this information to satisfy their CDD requirements and if the search returns with all the information as ‘unknown,’ the search is essentially useless and a waste of time,” Moore added.

And in a February letter to FinCEN, Elizabeth Sullivan, CUNA’s senior director of advocacy and counsel, expressed concern about whether financial institutions will be able to use the beneficial ownership date to develop a customer risk profile and additional monitoring. FinCEN must permit financial institutions to use the information for anti-money laundering and Bank Secrecy Act compliance, she wrote.

Latest Criticism

On Monday, McHenry blasted FinCEN.

“The degree of regulatory authority and volume of Americans’ sensitive information amassed by FinCEN would make the intelligence community blush,” he said. “They have done this with little transparency and accountability, and a disregard for Americans’ privacy rights.”