House Republicans Blast FinCEN’s BOI Reporting Rule
Republican members of the House Financial Services Committee on Feb. 14 criticized the Financial Crimes Enforcement Network’s new beneficial ownership information (BOI) reporting rule (see 2401050023), saying it's too complicated and burdensome for small businesses.
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While the Corporate Transparency Act (CTA), which mandates the new rule, required beneficial owners to submit four pieces of information, the filing form developed by the Biden administration consists of 51 data points, committee Chairman Patrick McHenry, R-N.C., said at a hearing.
“The administration has transformed what was a simple and direct program into Frankenstein’s monster of complexity,” McHenry said.
Rep. William Timmons, R-S.C., who was a small business owner before entering Congress, said many small businesses will feel compelled to hire a lawyer to avoid making a mistake on the filing form. For business owners with multiple limited liability companies, the legal fees could total thousands of dollars, he said.
“This is not helping small businesses. It’s hurting them,” Timmons asserted.
FinCEN director Andrea Gacki insisted that an attorney is not required to complete the filing form and that she believes the filing process is “simple, easy to use and secure.” She also said enforcement actions will be reserved for those who willfully fail to comply, not those who make an honest mistake.
“We are not in the business of taking gotcha enforcement,” she testified.
To help small businesses file, FinCEN is developing several options, "including the option for reporting companies to work through a service provider," said Brian Nelson, treasury undersecretary for terrorism and financial intelligence.
Lawmakers also cited a survey that found that 90% of members of the National Federation of Independent Business were not aware of the new rule. While about 500,000 companies have filed since FinCEN began accepting BOI reports on Jan. 1 (see 2401050023), that's a far cry from the 32 million or so that will have to register.
To publicize the new rule, FinCEN has published its Small Entity Compliance Guide in 11 languages, issued answers to more than 80 frequently asked questions, and stood up a Beneficial Ownership Contact Center to provide additional guidance, Gacki said. It also is using social media and partnering with other organizations, including the Internal Revenue Service and secretaries of state.
Nelson said FinCEN is devising a reporting method for those who cannot file electronically, such as the Amish. “We totally appreciate that we’re going to have to develop something to address that concern,” he testified.
The new rule, which will require companies to submit information on who owns and controls them, is designed to help the government prevent sanctioned parties and others from hiding money or property in the U.S. (see 2312210017). "Full implementation of the CTA will be a powerful deterrent and will help ensure that money launderers, tax evaders, criminals and other illicit actors cannot hide their ill-gotten gains in the United States with anonymity and impunity," Nelson said.
Rep. Dan Meuser, R-Pa., questioned whether FinCEN, which has about 300 employees, will have sufficient resources to identify "red flags." Gacki said her agency will use "technological solutions where we can to ensure that we are fairly and accurately looking through this data."