Janet Yellen resists calls to extend Fincen deadline

Janet Yellen resists calls to extend Fincen deadline

WASHINGTON — Republican lawmakers have expressed concern about the burden of a new rule requiring U.S. legal entities to submit beneficial ownership information to the Treasury Financial Crime Fighting Networkquestioning Treasury Secretary Janet Yellen during a hearing before the House Financial Services Committee. Rep. Patrick McHenry, R-N.C., the committee chairman, urged the cabinet official to do more to inform small businesses of their new obligations and eliminate any duplication of reporting.

“Because of the implementation of Rules 1 and 2, every small business in the U.S. is subject to a new reporting requirement that they are likely unaware of,” McHenry said. “And that needs to be clarified.”

The bipartisan Corporate Transparency Act, passed by Congress as part of a 2021 defense spending bill, made beneficial ownership records mandatory. officially opened Even as Fincen continues to iron out details of the CTA’s implementation and despite political resistance, according to Janet Yellen’s update at the hearing, the database has so far received only about 2.7 million applications, a fraction of the 31 million companies that must file by the January 1, 2025, deadline.

The agency had previously announced that it would issue three rules governing reporting requirements for firms; access by law enforcement and financial entities to the database; and a revised customer due diligence rule on how financial firms can use the data to comply with anti-money laundering regulations. The first of these, known as the “reporting rule” Finalized in September 2022, it requires entities, such as corporations and limited liability companies operating in the United States, to report their beneficial owners. The second “access rule,” published in December, details the conditions under which this data can be disclosed to law enforcement, financial institutions and regulators.

Fincen will then undertake a third regulatory procedure to revise its existing rule on customer due diligence integrate the use of the new BOI database into the Bank Secrecy Act’s regulatory requirements for financial institutions. When McHenry pressed her to finalize updates to Fincen’s customer due diligence requirement, Yellen said she believed a revised rule could come as early as the fourth quarter.

“So we’re working to revise that proposal to make sure it’s consistent with the requirements of the Corporate Transparency Act and I think we’re hoping to have it out this fall,” she said. “We’re currently in contact with other stakeholder agencies to discuss the content of the proposal, but we want to have a notice that will allow the public to have their say.”

Rep. Ralph Norman, R-S.C., asked Yellen to consider extending the deadline for compliance with the rule, noting that many voters are likely unaware of the reporting requirement.

“These companies are struggling … the average plumber is not going to go to a website and trying to figure out how to comply with beneficial ownership,” he said. “Consider expanding it.”

The CTA penalizes companies that fail to comply with data reporting and protection requirements with up to $500 per day of non-compliance, or even jail time in serious cases, which Republican lawmakers consider onerous.

“As Treasury, extend this deadline and work with us in a bipartisan manner to make sure our small businesses are taken care of,” said Rep. Zach Nunn, R-Iowa. “My fellow Americans consider a $500 per day fine to be not only a rip-off, but a very painful impact.”

Yellen stressed that the agency is only interested in penalizing companies that deliberately flout the rules.

“The CTA penalizes willful violations of the law,” Yellen said. “We are not seeking to take enforcement action against small businesses.”