Patrick McHenryChairman

Washington, February 16, 2023 -

House Financial Services Committee Chairman Patrick McHenry (NC-10) and National Security, Illicit Finance, and International Financial Institutions Subcommittee Chairman Blaine Luetkemeyer (MO-03) sent a comment letter to Treasury Secretary Janet Yellen and Financial Crimes Enforcement Network (FinCEN) Acting Director Himamauli Das in response to FinCEN’s Notice of Proposed Rulemaking (NPRM) regarding access to beneficial ownership information. Prior to the comment letter, Chairman McHenry raised concerns with the NPRM which fails to prioritize Americans’ financial privacy in the way Congress intended.

Read the full letter here.

Read key excerpts from the letter:

“We write to express our serious concerns with the Department of the Treasury’s Notice of Proposed Rulemaking titled “Beneficial Ownership Information Access and Safeguards” (NPRM), released on December 16, 2022. As with the previous rule on beneficial ownership reporting, this NPRM deviates from the statute and congressional intent set out in Division F of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021. The beneficial ownership reporting regime was crafted to be a strategic tool to target bad actors and nation-states like Russia and China who are using our financial system to engage in illicit activity. To that end, Congress was clear with regard to its intent on: 1) the type of information to be reported, 2) how the information would be protected, and 3) who could access the information and when. Committee Republicans will continue to ensure that beneficial ownership information is protected; the database secure and accessible only by authorized individuals.

“Division F included the strongest privacy and disclosure protections for America’s small businesses as it relates to the collection, maintenance, and disclosure of beneficial ownership information. The protections set out in Division F ensure that small business beneficial ownership information is treated and protected just like an individual’s tax return information.

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“Additionally, Division F requires each requesting agency to establish and maintain a permanent, auditable system of records describing: each request, how the information is used, and how the beneficial ownership information is secured. It required requesting agencies to furnish a report to the Department of Treasury describing the procedures in place to ensure the confidentiality of the beneficial ownership information provided directly to the Secretary of the Treasury.

“Separately, Division F requires two additional audits. First, it directs the Secretary of Treasury to conduct an annual audit to determine whether beneficial ownership information is being collected, stored and used as intended by Congress. Division F also directs the Government Accountability Office to conduct an audit annually for six years to ensure that the Department of Treasury and requesting agencies are using the beneficial ownership information as set out in Division F. … This information ensures that Congress has independent data on the efficacy of the reporting regime and whether confidentiality is being maintained.

“Finally, Division F requires the Department of Treasury to issue an annual report on the total number of court authorized requests received by the Secretary to access the database. The report must detail the total number of court authorized requests approved and rejected and a summary justifying the action. This report to Congress will ensure the Department of Treasury does not misuse its authority to either approve or reject court authorized requests.

“The current NPRM fails to meet these directives. It is Congress’ expectation that the new beneficial ownership information database; who can access the database; and the statutory safeguards to protect the information should mirror those provisions set out in 26 USC 6103.

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“FinCEN should establish a secure process through which financial institutions are able to fully access the database to confirm customer information on demand. This process should include a clear definition of customer consent on which financial institutions can rely to query the database. In addition, the rule should clearly define when customer consent is revoked.

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“FinCEN should also establish a process by which updates or changes in information submitted to the beneficial ownership information database is shared with the corresponding financial institution. This will help limit discrepancies between the database and institution’s information. Additionally, FinCEN should clarify how discrepancies will be resolved, the circumstances in which discrepancies will be considered significant; and the steps a financial institution and FinCEN will take to mitigate the potential risks.

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“Finally, it is important to restate this new process was never designed to undermine the requirement that financial institutions identify and verify the beneficial owners of their legal entity customers pursuant to 31 C.F.R. § 1010.230(a). It was not designed to be used by financial institutions only at account opening. And it was not intended to impose duplicative requirements on financial institutions.

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“Thus, Congress’ intent is clear on the development of a new beneficial ownership reporting paradigm, and it is our expectation that the bicameral, bipartisan agreement will be reflected in the future finalized rule.”

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