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Financial Services Law Insights and Observations


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  • New York State bill requires disclosure of beneficial owners of limited liability companies

    State Issues

    On March 1, a newly enacted bill from New York State, S8059, (the “Act”) was signed by the governor and amended New York State law governing limited liability companies by mandating New York LLCs to file beneficial ownership information with the New York Department of State. The Act set a deadline for new LLCs to file the required ownership information within 30 days of their establishment; for existing LLCs, the bill required them to comply with the new requirements by January 1, 2026. The Act demanded that exempt companies, defined as LLCs or foreign LLCs not otherwise defined as a reporting company that met a condition for exemption in 31 U.S.C. §5336(a)(11)(B), electronically declared their statuses and the basis for their exemptions shortly after formation. It further imposed an annual requirement on all limited liability companies to update or confirm their ownership or exempt status. Additionally, access to the beneficial ownership reports was restricted to law enforcement under certain conditions. The Act enforced compliance with the requirements by imposing up to $500 daily fines for late submissions, the possibility of companies being marked as delinquent, and the threat of dissolution for persistent non-compliance.

    State Issues New York State Legislation Beneficial Ownership

  • The Corporate Transparency Act: FinCEN Finalizes Beneficial Ownership Information Access Rule as Reporting Rule Takes Effect

    Federal Issues

    The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has issued a final rule (the Access Rule) regarding access to and use of beneficial ownership information (BOI) maintained by FinCEN.

    The Access Rule details the circumstances under which FinCEN can disclose BOI to authorized recipients. It also spells out how FinCEN will protect that information and outlines data protection protocols and oversight mechanisms for those who receive beneficial ownership information. The rule takes effect February 20, 2024.  It is the second of three FinCEN rulemakings to implement the Corporate Transparency Act (CTA).

    The first rule, the Beneficial Ownership Reporting Rule, took effect January 1, 2024. As covered previously, it requires certain domestic and foreign companies created, or registered to conduct business, in the United States to report information to FinCEN regarding their beneficial owners – individuals who directly or indirectly own or control 25 percent or more of the ownership interests of a reporting company or who exercise substantial control over such an entity.

    Read more here.

    Federal Issues Agency Rule-Making & Guidance FinCEN Beneficial Ownership Corporate Transparency Act

  • FinCEN releases beneficial ownership reporting guidance

    Financial Crimes

    On March 24, FinCEN released its first set of guidance materials to aid the public and small businesses in reporting beneficial ownership information (i.e., individuals who directly or indirectly own or control a company). As previously covered by InfoBytes, last September, FinCEN published a final rule establishing beneficial ownership information requirements, as required by the Corporate Transparency Act. The final rule, which becomes effective January 1, 2024, will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States, to report information about their beneficial owners to FinCEN. Reporting companies created or registered before January 1, 2024, will have until January 1, 2025, to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports. The guidance materials include FAQs, information on key filing dates, and informational videos. Additional guidance will be published in the coming months, including a Small Entity Compliance Guide, FinCEN said in the announcement.

    Financial Crimes Agency Rule-Making & Guidance Of Interest to Non-US Persons FinCEN Beneficial Ownership Corporate Transparency Act

  • CSBS says state regulators need access to FinCEN’s beneficial ownership database

    State Issues

    On February 14, the Conference of State Bank Supervisors commented that FinCEN should be more explicit in its inclusion of state regulators as agencies that can request access to FinCEN’s forthcoming secure, non-public beneficial ownership information database. (See comment letter here.) As previously covered by InfoBytes, last December FinCEN issued a notice of proposed rulemaking (NPRM) to implement provisions of the Corporate Transparency Act (CTA) that govern the access to and protection of beneficial ownership information (BOI). The NPRM proposed regulations for establishing who may request beneficial ownership information, how the information must be secured, and non-compliance penalties, and also addressed aspects of the database that are currently in development. Agreeing that the new database would help enhance anti-money laundering and countering the financing of terrorism standards and help prevent the use of privacy to hide illicit activity from law enforcement and government authorities, CSBS asked that the final rule “explicitly define state regulators so that there is no confusion about their ability to access BOI when examining state-chartered banks and non-depository trust companies for compliance with customer due diligence requirements under the Bank Secrecy Act (BSA).” According to CSBS, state regulators conducted over 1,200 BSA exams in 2021. CSBS further pointed out that being able request BOI on an as needed basis would aid investigative and enforcement responsibilities for both state-chartered banks and state-licensed nonbank financial services providers. 

    State Issues Financial Crimes State Regulators CSBS Beneficial Ownership FinCEN Corporate Transparency Act Customer Due Diligence Anti-Money Laundering Combating the Financing of Terrorism Bank Secrecy Act

  • FinCEN alert covers potential CRE investments by sanctioned Russians

    Financial Crimes

    On January 25, the Financial Crimes Enforcement Network (FinCEN) issued an alert to financial institutions on potential investments in the U.S. commercial real estate sector by sanctioned Russian elites, oligarchs, their family members, and the entities through which they act. The alert provides a list of possible red flags and typologies regarding attempted sanctions evasion in the commercial real estate sector and emphasizes financial institutions’ Bank Secrecy Act reporting obligations. The alert noted that banks frequently work with market participants who seek financing for commercial real estate projects, and that banks have customer due diligence obligations to verify the beneficial owners of legal entity customers. Specifically, the alert noted that “banks therefore may be in a position to identify and report suspicious activities associated with sanctioned Russian elites and their proxies including [politically exposed persons], among banks’ [commercial real estate]-related customers.” According to FinCEN, the recent alert builds on FinCEN’s March 2022 alert identifying real estate, luxury goods, and other high value assets involving sanctioned Russian and elites, and is the fourth alert issued by FinCEN on potential Russian illicit financial activity since Russia’s invasion of Ukraine in February 2022 (covered by InfoBytes here).

    Financial Crimes Of Interest to Non-US Persons FinCEN Russia Real Estate Bank Secrecy Act OFAC Sanctions OFAC Designations Customer Due Diligence Beneficial Ownership SARs Illicit Finance

  • FinCEN solicits feedback on beneficial ownership reporting requirements

    Financial Crimes

    On January 17, the Financial Crimes Enforcement Network (FinCEN) published two notices and requests for comment in the Federal Register related to the reporting process the agency intends to use to collect beneficial ownership data pursuant to the Beneficial Ownership Information Reporting Requirements final rule (published last September and covered by InfoBytes here). Under the final rule, most corporations, limited liability companies, and other entities created in or registered to do business in the U.S. will be required to report information about their beneficial owners to FinCEN. The first notice and request for comments invites interested parties to provide feedback on the application that will be used to collect information from individuals who seek to obtain an optional FinCEN identifier. The second notice and request for comments requests feedback on a report that certain entities will be required to file with FinCEN. The electronically filed report will identify the reporting entity’s beneficial owners, and—in certain cases—the individual who “directly filed the document with specified governmental authorities that created the entity or registered it to do business, as well as the individual who was primarily responsible for directing or controlling such filing, if more than one individual was involved in the filing of the document.” Comments on both notices are due by March 20.

    Financial Crimes Agency Rule-Making & Guidance Of Interest to Non-US Persons FinCEN Beneficial Ownership

  • FinCEN issues proposed beneficial ownership information access and safeguards rulemaking

    Financial Crimes

    On December 15, FinCEN issued a notice of proposed rulemaking (NPRM) to implement provisions of the Corporate Transparency Act (CTA) that govern the access to and protection of beneficial ownership information. (See also FinCEN fact sheet here.) The NPRM follows a final rule issued by FinCEN at the end of September (effective January 1, 2024), which establishes a beneficial ownership information reporting requirement (Reporting Rule) and requires most corporations, limited liability companies, and other entities created in or registered to do business in the U.S. to report information about their beneficial owners to FinCEN. (Covered by InfoBytes here.)

    In accordance with CTA requirements related to beneficial ownership information access and safeguard provisions, FinCEN’s NPRM proposes regulations for establishing who may request beneficial ownership information, how the information must be secured, and non-compliance penalties. Specifically, the proposal would limit the disclosure of beneficial information to “[f]ederal agencies engaged in national security, intelligence, or law enforcement activities; state, local, and Tribal law enforcement agencies with court authorization; financial institutions with customer due diligence requirements and regulators supervising them for compliance with such requirements; foreign law enforcement agencies, prosecutors, judges, and other agencies that meet specific criteria; and Treasury officers and employees under certain circumstances.” The proposal would also require authorized recipients to maintain security and confidentiality protocols that align with the scope of access and use provisions.

    Among other things, the NPRM addresses aspects of the secure, non-public beneficial ownership database that is currently in development, and specifies when and how reporting companies may report FinCEN identifiers tied to entities. Under the proposal, foreign requesters would be required to make their requests for beneficial ownership information through intermediary federal agencies, and financial institutions would only be allowed to request this information from FinCEN for purposes of complying with customer due diligence (CDD) requirements and only after receiving consent from the reporting company to which the information pertains.

    Comments on the NPRM are due by February 14, 2023. FinCEN explained that this is the second of three rulemakings planned to implement the CTA. The third rulemaking, which will revise FinCEN’s CDD rule, will occur no later than one year after the effective date of the Reporting Rule.

    Financial Crimes Agency Rule-Making & Guidance FinCEN Of Interest to Non-US Persons Corporate Transparency Act CDD Rule Beneficial Ownership

  • Treasury official flags “de-risking” as a concern in combating illicit financial risks

    Financial Crimes

    On December 5, Assistant Secretary for Terrorist Financing and Financial Crimes at the U.S. Department of Treasury Elizabeth Rosenberg outlined key illicit finance risks impacting the broader financial system during the ABA/ABA Financial Crimes Enforcement Conference. Rosenberg noted that for many nations, the illicit finance threat posed by Russia related to its invasion into Ukraine is a top priority. She commented that more than 30 countries immediately implemented sanctions or other economic measures against Russia, and that since then, the U.S. and other countries have created an expansive, multilateral web of restrictions targeting Russia’s ability to fund its war. Rosenberg also recognized that by reassessing their understanding of Russian illicit financial risks and implementing adaptive measures, companies and financial institutions play an important role in providing critical insight into emerging threats. Rosenberg also discussed Treasury’s risk-based approach to crafting policy responses, including those related to beneficial ownership transparency, investment adviser misuse, and the use of residential and commercial real estate to hide and grow illicit funds.

    Rosenberg warned, however, that there are challenges in implementing a truly risk-based approach. She pointed to observations made by the Financial Action Task Force, which showed that while many countries and their financial institutions “are keenly aware of where enhanced due diligence is needed,” many “often can not readily identify the inverse: places where simplified due diligence should be expected and permitted.” She cautioned that focusing on high-risk areas rather than lower-risk parts “is not without costs,” and illustrated a common form of de-risking that occurs “when financial institutions categorically cut off relationships or services to avoid perceived risks—for example, certain geographic regions—rather than applying a nuanced, risk-based approach.” Doing so can lead to “deleterious effects,” she warned, such as excluding businesses based on their location or status, or impacting emerging markets that could serve underbanked populations. Rosenberg said Treasury intends to study these concerns through the Anti-Money Laundering Act of 2020, and will develop a strategy for addressing de-risking, including recommendations on ways to improve public-private engagement on the issue, regulatory guidance and adjustments, and international supervision.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury Risk Management Russia Ukraine Invasion FATF Anti-Money Laundering Act of 2020 Beneficial Ownership Illicit Finance

  • ECJ invalidates AML directive granting public access to beneficial ownership information

    Privacy, Cyber Risk & Data Security

    On November 22, the European Court of Justice (ECJ) announced a ruling invalidating a provision of the 2018 amended EU anti-money laundering directive that guaranteed public access to the beneficial ownership information of legal entities incorporated within member states. The case was referred to the ECJ by a Luxembourg court following two actions that disputed the compatibility of this directive with the beneficial owners’ fundamental right to privacy. The ECJ was asked to issue a preliminary ruling on a series of questions concerning the interpretation of “exceptional circumstances” and “disproportionate risk,” as well as the directive’s compatibility with the Charter of Fundamental Rights of the European Union (Charter) and the GDPR. Under the directive, member states are required to enter and maintain beneficial ownership information in registers that are accessible to the general public. The directive is intended to prevent the financial system from being exploited for the purposes of money laundering or terrorist financing, and requires, with limited exemptions, that member states provide information on “the beneficial owner’s name, month and year of birth, nationality and country of residence, as well as the nature and extent of his or her beneficial interests.”

    In its announcement, the ECJ said that public access to beneficial ownership information “constitutes a serious interference with the fundamental rights to respect for private life and the protection of personal data” provided in Articles 7 and 8 of the Charter. “[T]he potential consequences for the data subjects resulting from possible abuse of their personal data are exacerbated by the fact that, once those data have been made available to the general public, they can not only be freely consulted, but also retained and disseminated,” the ECJ wrote in the judgment, adding that “in the event of such successive processing, it becomes increasingly difficult, or even illusory, for those data subjects to defend themselves effectively against abuse.”

    While the ECJ found that, by the measure at issue, the EU legislature is pursuing “an objective of general interest capable of justifying even serious interferences with the fundamental rights enshrined in Articles 7 and 8 of the Charter, and that the general public’s access to information on beneficial ownership is appropriate for contributing to the attainment of that objective,” the “interference entailed by that measure is neither limited to what is strictly necessary nor proportionate to the objective pursued.” Additionally, the ECJ held that the amended “directive amounts to a considerably more serious interference with the fundamental rights guaranteed in Articles 7 and 8 of the Charter” without being offset by any benefits that may result from the amended directive as compared to the previous version in terms of combating money laundering and terrorist financing. However, the ECJ did recognize that civil society and the press have a legitimate interest in accessing such information, given their role in the fight against money laundering.

    Privacy, Cyber Risk & Data Security Courts Financial Crimes Of Interest to Non-US Persons Anti-Money Laundering GDPR Beneficial Ownership EU

  • FAFT restricts Russia’s membership, takes action on corruption and drug trafficking

    Financial Crimes

    On October 20, the U.S. Treasury Department announced that the Financial Action Task Force (FATF) concluded its first plenary of the Singaporean presidency, in which it, among other things, took steps to combat corruption and illegal fentanyl trafficking and enhance financial transparency. During the meeting, FATF agreed to seek public input on draft guidance for implementing the FATF standard on beneficial ownership transparency for legal persons. The efforts to improve transparency in beneficial ownership “seek to improve the ability of law enforcement to trace, report, and seize illicit proceeds, and to make it harder for criminals and others to exploit opaque legal structures such as shell companies to hide and launder the proceeds of their crimes.” FATF also adopted a U.S.-led report on money laundering related to the illicit trafficking of synthetic opioids, including fentanyl, which provides information and best practices so that law enforcement and financial investigators around the world can expand their work on complex, cross-border money laundering investigations involving the proceeds of drug trafficking. The FATF also agreed to additional restrictions on the membership rights of the Russian Federation due to its war against Ukraine, including by barring them from participating in current and future FATF project teams.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury Russia Singapore Anti-Money Laundering FATF Beneficial Ownership


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