Treasury Department to Limit Beneficial Ownership Information Reporting Rule
Commentary by Thomas Delaney
The Treasury Department announced that it will not enforce penalties or impose fines for failure to comply with the Corporate Transparency Act's beneficial ownership information reporting rule.
In a press release, the Treasury Department stated that, with respect to the Corporate Transparency Act, "not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either."
The Treasury Department said it will be "issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only," with the goal of "supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest."
Commentary
The actions taken by the Treasury indicate that only foreign reporting companies—an as yet undefined term—will be required to file beneficial owner information as contemplated by the CTA.
Despite the original intent of the CTA, beneficial owners of US formed LLCs will no longer be required to file information with FinCEN. It remains unclear what will happen with information that has already been filed with FinCEN by beneficial owners of US companies. Also, it will be interesting to see whether the US will be treated as an outlier in the global effort to stanch the flow of illicit funds to criminal gangs, drug cartels and terrorist organizations.
It should be noted that the actions taken over the weekend to water down the CTA reporting regime, in no way diminish the obligation that banks and other financial institutions have to understand the beneficial owners and control persons of LLCs and other non-transparent corporate customers.