May 5, 2021
Policy Division
Financial Crimes Enforcement Network
P.O. Box 39
Vienna, VA 22183
Filed Using Federal E-Rulemaking Portal
Re: Docket Number FINCEN-2021-0005 and RIN 1506-
AB49
To Whom It May Concern:
We, as state attorneys general write to provide comments about
the Beneficial Ownership Information Reporting Requirements,
Docket Number FINCEN-2021-0005 and RIN 1506-AB49.
Specifically, we address questions 32, 33, 36, and 46 in the
Advance Notice of Proposed Rulemaking, and raise one other
issue.
Our comments are consistent with the sense of Congress, which
requires that regulations “to the greatest extent practicable…
collect information in a form and manner that is reasonably
designed to generate a database that is highly useful to… law
enforcement agencies…” NDAA § 6402(8)(C).
I. Background
a. Corporate Transparency Act
The Corporate Transparency Act (CTA) was passed on January 1,
2021, as part of the National Defense Authorization Act (NDAA).
The CTA requires certain entities to disclose their true, or
“beneficial,” owners,
1
including the owners’ full legal name, date of
1
In the CTA, a beneficial owner is any individual who, directly or indirectly, (i)
exercises substantial control over the entity or (ii) owns or controls not less
birth, current residential or business street address, and a unique identifying
number from an acceptable identification document (such as a driver’s license or a
passport). NDAA § 6403(2)(A).
FinCEN may then disclose that beneficial ownership information “only upon receipt
of a request, through appropriate protocols, . . . from a State,
2
local, or Tribal law
enforcement agency, if a court of competent jurisdiction, including any officer of
such a court, has authorized the law enforcement agency to seek the information in
a criminal or civil investigation.” NDAA § 6403(c)(2)(B)(i)(II). Federal enforcers,
however, are not required to obtain the imprimatur of a court to obtain access to
this information. NDAA § 6403(c)(2)(B)(i)(I).
The CTA is a successor to S. 2563, the Improving Laundering Laws and Increasing
Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT
CASH) Act, which was the subject of a June 30, 2020, National Association of
Attorneys General letter signed by 42 attorneys general.
3
The ILLICIT CASH Act,
however, placed federal and state enforcers on equal footing to obtain beneficial
ownership information.
II. Comments
• (32) When a state, local, or tribal law enforcement agency requests
beneficial ownership information pursuant to an authorization from
a court of competent jurisdiction to seek the information in a
criminal or civil investigation, how, if at all, should FinCEN
authenticate or confirm such authorization?
FinCEN should develop a portal through which the database can be directly
accessed by State, local, or Tribal law enforcement agency (collectively, State
Enforcers) who receive the required training. NDAA § 6403(c)(3)(G)(iii). This portal
should allow those State Enforcers to immediately obtain responsive documents
after affirming under penalty of perjury that “an officer. . . of a court of competent
jurisdiction” has authorized them to “seek the information in a criminal or civil
investigation.” NDAA § 6403(c)(2)(B)(i)(II). For the reasons set forth below, requiring
than 25 percent of the ownership interests of the entity. NDAA § 6403(a)(3)(A).
2
“State” includes the U.S. territories and the District of Columbia. NDAA § 6403(a)(12).
3
Letter from the National Association of Attorneys General to Sens. Michael Crapo & Sherrod Brown
(June 30, 2020), https://www.naag.org/policy-letter/attorneys-general-urge-senate-to-pass-law-
to-fight-shell-companies/. Signatories were from the following state attorney general’s offices: AK,
AL, AR, CA, CO, CT, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, MA, MD, ME, MI, MN, MP, MS, NC, ND, NE, NJ, NM,
NY, OH, OK, OR, PA, PR, RI, SC, SD, UT, VA, WA, WI, and WV.
State Enforcers to serve FinCEN with a copy of a court order and then have FinCEN
manually provide the requested records is unnecessary and inefficient, and would
ignore Congress’s requirement that the regulations “generate a database that is
highly useful to . . . law enforcement agencies . . .” NDAA § 6402(8)(C).
First, the presumption should be that State Enforcers will access and use beneficial
ownership data responsibly. For years, State Enforcers have been accessing
Suspicious Activity Reports (SARs), which do not require court approval to obtain
and are maintained by FinCEN. Misuse of SARs can lead to criminal prosecutions;
two recent cases involve unlawful disclosure of SARs by a FinCEN employee and an
IRS employee.
4
Other federal prosecutions for unlawful disclosure have been of an
FBI agent and a banker.
5
We understand there have been no prosecutions of state
enforcers for unauthorized disclosure of SARs. That State Enforcers are responsibly
accessing and using existing FinCEN data should lay to rest any fears about misuse
of beneficial ownership data that might warrant requiring FinCEN to be served with
a copy of the actual court order.
Second, time is of the essence in many investigations. We understand that FinCEN
has no mechanism to accept court process, as State Enforcers have—like federal
enforcers—been permitted to directly access to FinCEN data like SARs. Requiring
the construction of a new process within FinCEN to accept a court order and then
provide the relevant data is inefficient and would likely be used only for State
Enforcers—as federal agencies, international enforcers, financial institutions, and
federal regulators are not required to obtain court authorization before seeking
access to beneficial ownership data. NDAA § 6403(c)(2)(B)(i)(I), (ii), (iii), (iv).
Third, State Enforcers will have every incentive to comply with the law. The penalties
for unauthorized disclosure or use are substantial: up to five years in prison and a
$250,000 fine. NDAA § 6403(h)(3)(B)(ii)(I). Lying about a court order to access
4
Press Release, U.S. Dep’t of Just., U.S. Att’y’s Off., S.D.N.Y., Former Senior Fincen Employee Pleads
Guilty to Conspiring to Unlawfully Disclose Suspicious Activity Reports (Jan. 13, 2020),
https://www.justice.gov/usao-sdny/pr/former-senior-fincen-employee-pleads-guilty-conspiring-
unlawfully-disclose-suspicious; Press Release, U.S. Dep’t of Just., U.S. Att’y’s Off., N.D. Ca., IRS
Employee Charged with Unlawful Disclosure of Suspicious Activity Reports (Feb. 21, 2019),
https://www.justice.gov/usao-ndca/pr/irs-employee-charged-unlawful-disclosure-suspicious-
activity-reports.
5
Press Release, U.S. Dep’t of Just., Former FBI Special Agent Sentenced to Five Years in Bribery
Scheme (Sept. 14, 2015), https://www.justice.gov/opa/pr/former-fbi-special-agent-sentenced-five-
years-bribery-scheme; Press Release, U.S. Dep’t of Just., U.S. Att’y’s Off., C.D. Ca., Former Chase Bank
Official Convicted of Taking Bribes and Disclosing Existence of a Suspicious Activity Report (Jan. 11,
2011), https://archives.fbi.gov/archives/losangeles/press-releases/2011/la011111.htm.
information in the beneficial ownership database would also likely violate other
existing federal statutes that carry significant penalties.
6
Moreover, the CTA contemplates regular audits—by State Enforcers of the
beneficial ownership information their agencies receive, NDAA § 6403(c)(3)(I), and
by the Secretary of the Treasury of State Enforcers’ adherence to their own
protocols, NDAA § 6403(c)(3)(I). See also NDAA § 6402(7)(B) (“[T]he Secretary of
the Treasury shall . . . take all steps, including regular auditing, to ensure that
government authorities accessing beneficial ownership information do so only for
authorized purposes consistent with this title”). Thus, any unauthorized access or
disclosures would likely be discovered.
Finally, FinCEN will also presumably track the identities of those who access these
records. FinCEN’s maintenance of that data—coupled with substantial criminal
penalties and regular audits—provide more than sufficient deterrence against
misuse of the data by State Enforcers. This is particularly true given that Congress is
not requiring any other entity who is eligible to obtain access to beneficial
ownership data to obtain court authorization.
• (33) Should FinCEN provide a definition or criteria for determining
whether a court has “competent jurisdiction” or has “authorized”
such an order? If so, what definition or criteria would be
appropriate?
FinCEN should consider providing a definition or criteria for these terms, but only
after discussion with State Enforcers and with state courts to ensure that the
definition or criteria is sufficiently elastic to encompass the processes used by
courts in every state and territory.
Notably, the statute also provides that “any officer” of a “court of competent
jurisdiction” may authorize such an order. This language is clearly intended to
include both judges and other courthouse staff and should also be the subject of
additional discussion between FinCEN and state authorities.
• (36) How should FinCEN handle updated reporting for changes in
beneficial ownership when beneficial ownership information has
6
See, e.g., 18 U.S.C. § 1030(a)(1), (c)(1)(A) (providing for penalties including 10 years in prison for
“exceeding authorized access” to “information that has been determined by the United States
Government . . . to require protection against unauthorized disclosure. . .”); 18 U.S.C. § 1621 (providing
for up to five years in prison for intentionally lying in a “statement under penalty of perjury” under 28
U.S.C. § 1746).
been previously requested by financial institutions, federal
functional regulators, law enforcement, or other appropriate
regulatory agencies?
o a. If a requestor has previously requested and received
beneficial ownership information concerning a particular legal
entity, should the requester automatically receive
notification from FinCEN that an update to the beneficial
ownership information was subsequently submitted by the
legal entity customer?
o b. If so, how should this notification be provided?
o c. Should a requesting entity have to opt in to receive such
notification of updated reporting?
State Enforcers that have obtained beneficial ownership information should be
automatically updated if there is a change in beneficial ownership, as it could have
material bearing on their investigations and enforcement actions. This should
include both if a reporting company, NDAA § 6403(a)(11), obtains a new beneficial
owner, and if a beneficial owner whose information has been provided to a State
Enforcer is associated with a new reporting company.
We understand that the Secretary of the Treasury is required to “conduct a review”
of the amount of time reporting companies should have to report changes in
beneficial ownership, NDAA § 6403(b)(1)(E)(ii), which is currently one year, NDAA§
6403(b)(1)(D). That review is to weigh the “benefit to law enforcement and national
security officials” against the burden to the reporting companies of a shorter time
period. NDAA § 6403(b)(1)(E)(ii). We welcome the opportunity for ongoing dialogue
about how to weigh the needs of law enforcement to obtain current beneficial
ownership information against the burden imposed on reporting companies.
• (46) How can FinCEN best partner with state, local, and tribal
governmental agencies to achieve the purposes of the CTA?
FinCEN should be in frequent contact with organizations, like the National
Association of Attorneys General, that can help facilitate the ongoing conversations
to help ensure FinCEN creates regulations consistent with Congress’s goal of
creating a beneficial ownership database that is “highly useful” to State Enforcers
and other law enforcement entities.
• One additional issue: Use at trial and compliance with Brady/ Giglio
and discovery obligations.
The nondisclosure requirements do not appear to allow beneficial ownership
information to be used at trial or provided to a defendant during discovery.
Information that cannot be used at trial or which a prosecutor cannot provide to the
defendant—particularly if it is exculpatory/ impeaching—is rarely “highly useful” to
law enforcement. This is particularly true if that information cannot be used as a
lead to obtain the same evidence from a third party through channels that ensure it
is admissible at trial and can be provided to the defense.
While similar restrictions on SARs do not prevent the underlying information from
being used at trial or provided in discovery,
7
it is unclear how enforcers will be able
to use the database information to charge and prove crimes, or discharge their
discovery and disclosure obligations, as the beneficial ownership information is
provided directly to FinCEN and exists only in the beneficial ownership database.
Unlike with SARs, as explained in the footnote below, there appears to be no other
source other than the reporting company itself from which the information required
by the CTA can be requested. While some secretaries of state may require at least
some of that information, Congress found that “most or all States do not require
information about the beneficial owners . . . formed under the laws of the State.”
NDAA § 6402(1). Accordingly, FinCEN should explore developing regulations that
provide guidance about how beneficial ownership information may be used to
charge and prove criminal and civil cases, as well as provided to defendants,
perhaps pursuant to a protective order.
* * * * *
Finally, we note that the Secretary of the Treasury is required to, to the greatest
extent practicable, “establish partnerships with State, local, and Tribal governmental
agencies.” NDAA § 6403(b)(1)(F). We welcome ongoing conversation with the
Secretary and FinCEN about the CTA and the regulations that will be codified to
ensure that the database is “highly useful” to our offices and those of other state,
local, and tribal enforcers.
7
SARs typically contain information about certain bank records and may include descriptions of
bank staff observations. Prosecutors can use the information in the SARs to subpoena the bank
records at issue and seek to separately interview the relevant bank staff, and then disclose to the
defendant the bank records they subpoenaed and information from their interviews of bank staff.
That ensures the information can be used at trial and that prosecutors discharge their discovery and
disclosure obligations without sharing the SARs themselves.
Sincerely,
Lawrence Wasden Peter F. Neronha
Idaho Attorney General Rhode Island Attorney General
Treg R. Taylor Rob Bonta
Alaska Attorney General California Attorney General
Phil Weiser William Tong
Colorado Attorney General Connecticut Attorney General
Kathleen Jennings Karl A. Racine
Delaware Attorney General District of Columbia Attorney General
Christopher M. Carr Leevin Taitano Camacho
Georgia Attorney General Guam Attorney General
Clare E. Connors Kwame Raoul
Hawaii Attorney General Illinois Attorney General
Tom Miller Derek Schmidt
Iowa Attorney General Kansas Attorney General
Aaron M. Frey Brian Frosh
Maine Attorney General Maryland Attorney General
Maura Healey Dana Nessel
Massachusetts Attorney General Michigan Attorney General
Keith Ellison Douglas Peterson
Minnesota Attorney General Nebraska Attorney General
Aaron D. Ford John M. Formella
Nevada Attorney General New Hampshire Attorney General
Gurbir S. Grewal Hector Balderas
New Jersey Attorney General New Mexico Attorney General
Letitia James Josh Stein
New York Attorney General North Carolina Attorney General
Wayne Stenehjem Edward Manibusan
North Dakota Attorney General Northern Mariana Islands Attorney General
Dave Yost Ellen F. Rosenblum
Ohio Attorney General Oregon Attorney General
Josh Shapiro Alan Wilson
Pennsylvania Attorney General South Carolina Attorney General
Jason Ravnsborg T.J. Donovan
South Dakota Attorney General Vermont Attorney General
Denise N. George Mark R. Herring
Virgin Islands Virginia Attorney General
Robert W. Ferguson Patrick Morrisey
Washington Attorney General West Virginia Attorney General
Joshua L. Kaul
Wisconsin Attorney General
