NSBA Urges Senate to Oppose Beneficial Ownership BillNovember 14, 2019
On Tuesday, Nov. 14, NSBA joined a broad coalition of business groups in formally urging the Senate to oppose TITLE IV of S. 2563, the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings Act (the ILLICIT CASH Act). Title IV of the ILLICIT CASH Act would require nearly every small-business owner to file new reports and register significant personal identifying information with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) detailing all “beneficial owners” of the company.
The bill authored by Sens. Mark Warner (D-Va.) and Tom Cotton (R-Ark.) is substantially similar to the Corporate Transparency Act (H.R. 2513) which NSBA strongly opposed. The Senate bill now has eight cosponsors and is gaining momentum despite broad opposition from many business groups.
Under this legislation, millions of small businesses would be required to register personally identifiable information with FinCEN upon incorporation, file updated reports within 90 days of any ownership changes, and file additional updated reports within a year of any ownership information changes, such as an expiration of a driver’s license number. Failure to comply with these reporting requirements would be a federal crime with civil penalties of $500 per day up to $10,000, criminal penalties of up to 4 years in prison, or both.
The ILLICIT CASH Act would require disclosure of any individual who “receives substantial economic benefits from the assets of” a small business. While the bill defines “substantial economic benefits” as a person receiving “access to 25 percent or more of the funds and assets of the entity,” it also requires Treasury to provide clarity on the definition in regulations. This deference to regulators is problematic in that Congress would allow Treasury to embark on a rulemaking that further expands the “beneficial owner” definition.
The ILLICIT CASH Act raises significant privacy concerns as the proposed FinCEN “beneficial ownership” database would contain the names, dates of birth, addresses, and unexpired drivers’ license numbers or passport numbers of millions of small business owners. Unlike the CDD rule, which requires law enforcement to obtain a subpoena or warrant prior to accessing beneficial ownership information from financial institutions, the ILLICIT CASH Act would make this information accessible upon request “through appropriate protocols” to any local, state, tribal, or federal law enforcement agency or to law enforcement agencies from other countries via requests by U.S. federal agencies. Recent reports of the Foreign Intelligence Surveillance Court’s admonishing the Federal Bureau of Investigation for improperly accessing bulk data collected by the National Security Agency demonstrates that federal law enforcement databases can be misused. A subpoena or a warrant would safeguard the privacy of small business owners.
Senate Banking Committee Chairman Mike Crapo (R-Idaho) intends to schedule a committee markup on the ILLICIT CASH Act (S. 2563). The legislation, which would also make several updates to the Bank Secrecy Act, is emerging as the Senate’s primary vehicle for addressing shell company transparency issues, which Senator Crapo supports.
While this and other related bills are aimed at stemming money laundering and improving transparency of ownership of all U.S. companies, they would create significant unintended consequences with new burdens and complexity for America’s small businesses.
For NSBA, what is most concerning and perplexing about these bills is that they target small businesses by explicitly excluding businesses that have over 20 employees and more than $5 million in gross receipts or sales. NSBA is urging its members to contact their Senators TODAY and alert them to the unfair burden this legislation could impose on America’s smallest businesses.