Prepared Remarks of FinCEN Director Andrea Gacki During Beneficial Ownership Information Reporting Event in Columbus, Ohio

ANDREA GACKI
DIRECTOR, FINCEN

OPENING REMARKS
AS PREPARED FOR DELIVERY
BENEFICIAL OWNERSHIP INFORMATION REPORTING EVENT
COLUMBUS, OHIO

Good afternoon, and thank you, Under Secretary Nelson.

I also want to thank you all for coming out today, and I especially want to thank our distinguished Ranking Member, Congresswoman Beatty, and her office for their partnership in pulling this together.

I'm honored to be with you to discuss the work of the Treasury Department's Financial Crimes Enforcement Network-or FinCEN-and more specifically, to discuss the reasons why implementing the beneficial ownership information reporting requirements of the Corporate Transparency Act is one of our top priorities.

But first, I thought it would be helpful to explain a bit more about what FinCEN does, so you can understand why this initiative is so vital to our broader efforts to strengthen U.S. national security and protect our financial system.

First, FinCEN issues regulations to combat money laundering, terrorist financing, and other forms of illicit finance. Those regulations require that approximately 300,000 financial institutions report timely and accurate information under the Bank Secrecy Act regarding suspicious activity and certain transactions.

We then provide access to this information to authorized recipients, such as state and federal law enforcement and national security agencies, in order to combat money laundering and other illicit activities, protect the U.S. financial system, and safeguard the national security of the United States. For those same purposes, we - FinCEN - have teams of analysts who examine this reporting using advanced analytic tools and techniques to map illicit networks, identify trends and typologies, and isolate targets for investigations and enforcement. This helps law enforcement investigate serious crimes like narcotrafficking, human trafficking, fraud, and identity theft.

FinCEN also issues public alerts and advisories highlighting priority risks to the U.S. financial system and national security to drive further reporting to FinCEN by the financial sector and others, and FinCEN hosts public-private events to discuss everything from ideas for improving our overall regulatory regime to details on criminal schemes and typologies. These public/private exchanges are a key component of our ongoing support to law enforcement to combat the scourge of fentanyl across the country.

And we are also implementing the Anti-Money Laundering Act of 2020, including the Corporate Transparency Act, which is an important piece of the puzzle as we work to stop bad actors from exploiting the U.S. financial system.

With this background in mind, I want to turn to an important question: Why is it so important for small businesses to report their beneficial owners, the real people behind their companies?

It is because terrorist financiers, drug kingpins, and other criminals use anonymous corporate structures to launder, move, and hide illicit funds into and through the United States. This dirty money undermines legitimate business activity and compromises U.S. economic and national security. Moreover, the effects of financial crime are detrimental to cities, towns, neighborhoods, and families across America.

Human trafficking, fraud schemes, elder abuse, narcotraffickers, ransomware attackers, and other bad actors often rely on anonymous shell companies to facilitate these serious crimes. Examples of this can hit close to home. In just the last few years, a number of investigations and prosecutions have identified the use of anonymous shell companies as a means by which criminals attempt to evade detection, right here in Columbus. Under Secretary Nelson mentioned the case of an individual here in Columbus diverting more than $10 million in payments and, in part, using the embezzled money to purchase luxury goods.

I want to highlight still another case from just a few years ago in which a man here in Columbus was convicted of using shell companies to export oil and gas industry parts to Iran. In this instance, the man in question created a company that had no domestic operations or sales in an attempt to cover up the fact that he was illegally supplying industrial equipment to Iran-to the tune of $35,000 to $40,000 in profits a year.

In cases like these and many others across the country, corporate anonymity gives criminals a head start over law enforcement. Investigators must devote substantial time and resources to show who the real person is that controls or owns an entity. Criminals know about this advantage and use it to enrich themselves and exploit the U.S. financial system.

And so, in 2021, Congress enacted the bipartisan Corporate Transparency Act to help law enforcement fight this illicit activity. The Corporate Transparency Act is meant to peel back the layers of anonymity by requiring many companies doing business in the United States to report information to FinCEN about their beneficial owners-in other words, the real people who own or control them.

The information provided to FinCEN is housed in a secure, non-public database, and we've set rigorous standards around access and data-sharing to ensure that only authorized recipients can obtain beneficial ownership information and only for authorized purposes.

I'd also like to take a moment to discuss another example of how beneficial ownership information might help bring bad actors to account in the real world.

In 2018, the U.S. Department of the Treasury's Office of Foreign Assets Control, or OFAC-which administers and enforces economic sanctions-took action against a Russian oligarch named Suleiman Kerimov that should have prevented him from benefitting from his assets in the United States. When the United States took this action, it should not only have blocked Kerimov's assets in U.S. jurisdiction, but also prevented all U.S. persons from dealing with Kerimov. But for approximately four years after the United States imposed sanctions on him, Kerimov used a complex series of legal structures to continue to retain an interest in, and benefit from, his over $1 billion in assets in the United States. Kerimov's funds were subsequently invested in large public and private U.S. companies and managed by a series of U.S. investment firms and facilitators. Along the way, Kerimov and his proxies used various layers of shell companies, including LLCs, to conceal his interest. In 2022, after a yearslong investigation that consumed the work of several enforcement officers, OFAC publicly identified a Delaware-based corporate network that Kerimov was leveraging and finally blocked over a billion dollars of Kerimov's assets. Untangling this web of corporate structures allowed OFAC to ensure that Kerimov's assets in the United States remain blocked and inaccessible to him.

Identifying this network required an extensive, multi-year enforcement investigation into Kerimov's U.S. holdings by OFAC. Beneficial ownership information reporting can make these types of investigations more efficient by providing a direct resource for law enforcement, national security, and intelligence officials. It can give law enforcement an advantage over illicit actors, diminish the head start that corporate anonymity provides, and ultimately level the playing field for legitimate American businesses.

But let me be clear. Small business owners doing their best to comply with the law should not lose sleep over these new reporting requirements. The Corporate Transparency Act penalizes willful violations of the law, and this is where we plan to focus our enforcement actions. It's not a "gotcha" exercise, and we're not looking to needlessly burden America's thriving small business community.

On the other hand, the illicit actors that the Corporate Transparency Act targets-kleptocrats, criminals, money launderers, terrorist financiers, tax evaders, and others looking to manipulate America's corporate system to hide their identities-should lose sleep over this law.

As more legitimate and law-abiding businesses comply with the requirements and report beneficial ownership information, bad actors will increasingly be forced into tough choices that jeopardize their ability to perpetuate crime undetected.

If they choose not to file, or if they file false information, that may trigger an investigation. If they file true beneficial ownership information, they lose the anonymity that protects their criminal enterprise.

In other words, more transparency means fewer opportunities for bad actors to avoid detection, even when they think they're hiding.

We recognize-and celebrate-that America's small business community is vital to our economy. With that in mind, some ask why these reporting requirements apply to so many small businesses, but not bigger corporations. Indeed, the Corporate Transparency Act exempts certain other types of businesses, including some large businesses, from its beneficial ownership reporting requirements. In part, it's because many of those big businesses are often disclosing their ownership in some way. If you think of a big company like Amazon or even Kroger here in Ohio, they already disclose information about those who own or control them, and indeed, are frequently subject to greater regulatory scrutiny.

Nevertheless, we also know that running a small business is not easy. In fact, I know this firsthand because I come from a family of small business owners. I was very little when my dad went into business for himself, starting an excavating construction business in Flint, Michigan. I also witnessed the long hours my brother put in to run his small bakery in Bay City, Michigan, which brought together back-breaking manual labor and a lot of paperwork.

Experiences like my family's are why, in every step of implementing this law, we've considered small business owners and the potential burden that any regulation might impose on their day-to-day operations. Filing a report is generally easy and free of charge, and for companies with simple ownership structures, we estimate that it should take about 20 minutes. The majority of companies that are required to file should be able to complete the process without the help of an attorney or accountant. And it's not an annual requirement: unless you need to update or correct information, beneficial ownership reporting is a one-time filing.

To successfully support law enforcement and other officials as they work to protect our national security and economy, it's important for small businesses across the country to do their part. In terms of deadlines, most companies' reports aren't due until January 1, 2025. But we encourage you not to wait. The database is live and ready when you are. If you created or registered your business this year, in 2024, you have 90 days to file your initial report. Starting in 2025, every newly created or registered company must file within 30 days.

We have additional information about these deadlines and lots of guidance, FAQs, videos, and other materials to make compliance as easy as possible on our website, fincen.gov/boi-and we thank small businesses in advance for doing their part to help stop illicit finance.

Thanks again for joining me today, and thanks again to Congresswoman Beatty and her team for bringing us together. With that, I'm looking forward to your questions and thoughts, so I'll open the floor.

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