CTA is not the way to support small business when it comes to stemming money laundering.
On Tuesday, Nov. 7, the U.S. Treasury Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing part of the NSBA-opposed Corporate Transparency Act (CTA) which outlines when a business can use a FinCEN identifier instead of the specific information required on beneficial owners.
Per the guidance: “A FinCEN identifier is a unique number that FinCEN will issue upon request after receiving required information.” FinCEN, in their press release stated that allowing an individual to be identified by a FinCEN identifier should simplify the reporting process.
However, any individual who wishes to utilize a FinCEN identifier must first submit their name, date of birth, address, unique identification (driver’s license, state-issued ID or passport) along with an image of said identification. Once an individual has their FinCEN number, that identifier can be used by other reporting companies in-lieu of their personal data.
Unfortunately, the application process will be electronic which represents a significant potential vulnerability in data privacy and does nothing to assuage concerns over FinCEN’s storage of personal information. Furthermore, there remains a great deal of uncertainty in terms of which individuals’ information must be reported under the CTA, and this could lead many would-be beneficial owners to share private, personal information without there actually being a need for them to do so.
While the intent of the CTA was to stem money laundering, the CTA is not only bad policy, but also unconstitutional. Failure of a small business to comply—intentional or not—could result in up to $10,000 in fines and up to two years in prison.
NSBA has filed a lawsuit against Treasury over the implementing regulations of the CTA, however an act of Congress to repeal the law is the best way to ensure this bad policy doesn’t see the light of day.
Click here to read the full rule, and click here to learn more about FinCEN identifiers on p. 40 of the Small Entity Compliance Guide.