Lawmakers urge Treasury to implement shell-company law

WASHINGTON — Senior congressional Democrats urged the Treasury Department to move faster to implement a law passed last year cracking down on anonymous shell companies ahead of a fast-approaching deadline.

Passed by Congress in late 2020 with veto-proof majorities, the Corporate Transparency Act requires businesses to report their beneficial ownership directly to the Financial Crimes Enforcement Network when the company incorporates. The measure was seen as a significant source of regulatory relief for bankers, who would no longer be required to uncover and send that information about their business customers to Fincen.

But almost a year after the legislation’s passage, Democratic lawmakers now appear concerned that Fincen is dragging its feet. The law set an implementation deadline of Jan. 1, 2022.

In a joint letter dated Wednesday, Senate Banking Committee Chairman Sherrod Brown, D-Ohio, House Financial Services Chairwoman Maxine Waters, D-Calif., and House Oversight Chairwoman Carolyn Maloney, D-N.Y., urged Treasury Secretary Janet Yellen “to ensure swift action on the rule.”

“Effective and timely implementation of the new [beneficial ownership information] reporting requirement will be a dramatic step forward, strengthening U.S. national security by making it more difficult for malign actors to exploit opaque legal structures to facilitate and profit from their bad acts,” the lawmakers wrote.

Fincen issued an advanced notice of proposed rulemaking in April to generate initial public feedback before a rule is formally proposed. Six months later, Fincen has yet to indicate when the public can expect an official proposal.

“We urge your department to move expeditiously to publish its formal Notice of Proposed Rulemaking to implement the mandated [beneficial ownership information] reporting provisions,” the lawmakers said in their letter to Yellen. “Following completion of that process, we urge Treasury to promptly issue a final rule to implement this transformative law.”

Democrats noted with some sympathy that Fincen and Treasury have faced procedural and bureaucratic obstacles over the past year that could have impeded the rulemaking process. “Considering the transition to a new presidential administration, leadership changes at Fincen, and funding constraints under which that agency has been working in the absence of the appropriated funds which our committees authorized,” the lawmakers said, “we understand that these are challenging tasks.”

But even though they recognized “a final rule is now not likely to be issued by the implementation deadline,“ Brown, Waters and Maloney appealed to Yellen to get the job done as soon as possible.

“We hope that as the department’s leader, you will do everything that you can to ensure swift action on the rule,” the senior Democrats wrote. “Your direct involvement in this manner will ensure that this critical rulemaking will go into effect as early as possible next year.”