Treasury Secretary Janet Yellen has heralded a significant milestone in the U.S. government’s effort to enhance corporate transparency and combat illicit financial activities. Yellen announced that over 100,000 businesses have registered with a new Treasury database aimed at unmasking the true owners of U.S.-based companies. The Financial Crimes Enforcement Network (FinCEN), an agency within the Treasury Department, has launched the Beneficial Ownership Information (BOI) database to track and store reports disclosing the identities behind shell companies.
During a visit to FinCEN’s headquarters in Vienna, Virginia, Yellen underlined the importance of this initiative, stating, “Around the world, lack of transparency, specifically due to opaque corporate structures, makes it easier to conceal illicit activity.” She emphasized that information on beneficial ownership will bolster law enforcement efforts in “making arrests, prosecuting offenders, and seizing ill-gotten assets.”
The database comes as part of the implementation of the bipartisan Corporate Transparency Act signed into law in 2021. Most U.S. firms, particularly those with fewer than 20 employees—a group encompassing approximately 32.6 million companies—are now required to provide identifying information about their direct or indirect owners or controllers to the government. Yellen conveyed that the benefits of enhancing corporate transparency extend beyond national security to economic advantages, such as “protecting our financial system, reducing due diligence costs, enabling fair business competition, and increasing tax revenue.”
However, the introduction of the database has not been without controversy. In November 2022, the National Small Business Association filed a lawsuit against the Treasury, arguing that the reporting requirement is unduly burdensome, violates privacy and free speech protections, and encroaches upon states’ rights to regulate businesses. A judicial decision on the case is imminent.
In addition to the database, Yellen disclosed that the Treasury is contemplating further measures to address risks in the real estate sector, which is frequently exploited for money laundering purposes. It was revealed that at least $2.3 billion was laundered through U.S. real estate transactions between 2015 and 2020. The Treasury plans to propose new regulations to bring greater transparency to real estate transactions.
FinCEN’s BOI registry received these filings within a week of the database going online. With existing companies registered before January 1, 2023, having until January 1, 2025, to file their initial reports, and new companies established in 2024 being given 90 days post-registration to comply, the database is expected to grow significantly. FinCEN is also working on a phased approach to BOI access, with a pilot program set for federal agency users in 2024 and subsequent stages providing access to other government agencies, law enforcement, and financial institutions.
Relevant articles:
– Yellen says 100,000 firms have joined a business database aimed at unmasking shell company owners
– Yellen: 100,000 businesses have joined database unmasking shell-company owners
– Fincen business ownership registry receives over 100,000 filings