In a significant move towards enhancing corporate transparency and combating illicit financial activities, Treasury Secretary Janet Yellen disclosed that 100,000 businesses have enrolled in a novel database collecting “beneficial ownership” data on firms. Yellen emphasized the importance of the initiative during her visit to Treasury’s Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, stating that it sends a clear message that the United States is not a safe haven for illicit funds.
The newly established Treasury database is designed to gather information on beneficial ownership, addressing concerns about opaque corporate structures that facilitate the concealment of illicit activities. Yellen stressed that the disclosed information would aid law enforcement agencies in making arrests, prosecuting offenders, and seizing unlawfully acquired assets.
The Corporate Transparency Act, a bipartisan legislation enacted in 2021, granted the Treasury the authority to develop rules on beneficial ownership. As of January 1, 2024, most U.S. firms, particularly those with fewer than 20 employees, are required to report identifying information regarding direct or indirect ownership or control. This encompasses approximately 32.6 million businesses, emphasizing the broad scope of the reporting rule.
However, the National Small Business Association filed a lawsuit against Treasury in November 2022, contending that the reporting rule violates constitutional rights, posing an undue burden on small businesses, infringing on privacy and free speech protections, and encroaching on states’ regulatory authority over businesses. A judge is expected to make a decision on the matter imminently.
Yellen also revealed that alongside the business database, Treasury is exploring additional measures to address risks associated with commercial real estate, a sector often exploited for money laundering. Yellen cited a March 2023 statement indicating that illicit actors laundered a minimum of $2.3 billion through U.S. real estate between 2015 and 2020. The consideration of further steps aligns with the broader mission of increasing corporate transparency to safeguard national security, protect the financial system, reduce due diligence costs, foster fair business competition, and enhance tax revenue, Yellen emphasized.
