Worried about your privacy? You should be. Congress is back and is quietly moving legislation that threatens the privacy and security of millions of business owners, charities, foundations, and investors.
The bill is called the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act, and it has already passed the House as a rider on the annual National Defense Authorization Act (NDAA).
In simple terms, the Act would dramatically expand the Corporate Transparency Act’s (CTA) reporting requirements imposed on business owners and their employees. Here’s how Bloomberg describes the policies:
This is where tax professionals come in. The version of the bill that passed the House earlier this year would require “professional service providers who serve as key gatekeepers to the U.S. financial system adopt anti-money laundering procedures that can help detect and prevent the laundering of corrupt and other criminal funds into the United States.”
So, who exactly is a gatekeeper? “Ghostbusters” jokes aside, it’s you and me. Under the current version of the bill, any person—government workers excepted—who provides corporate or legal entity formation services, trust services, third-party payment services, or legal or accounting services involving certain financial activities would qualify.
If that sounds broad and potentially complicated, it is.
The bill would give Treasury up to one year to figure out the specifics, including who exactly would be considered a gatekeeper—and what their responsibilities would entail. Some examples in the bill include identifying and verifying account holders, collecting and reporting information, creating anti-money laundering programs, alerting authorities to suspicious transactions (think SARs, or suspicious activity reports), and establishing due diligence policies and controls.
As broad as Bloomberg makes it appear, the Act’s text is even broader. The bill doesn’t just target professionals, but instead appears to touch every business or non-profit in America other than those who are already “appropriately regulated” – whatever that means. Here’s who is covered according to the bill text:
(A) any person involved in—
(i) the formation or registration of a corporation, limited liability company, trust, foundation, limited liability partnership, partnership, or other similar entity;
(ii) the acquisition or disposition of an interest in a corporation, limited liability company, trust, foundation, limited liability partnership, partnership, or other similar entity;
(iii) providing a registered office, address or accommodation, correspondence or administrative address for a corporation, limited liability company, trust, foundation, limited liability partnership, partnership, or other similar entity;
(iv) acting as, or arranging for another person to act as, a nominee shareholder for another person;
(v) the managing, advising, or consulting with respect to money or other assets;
(vi) the processing of payments;
(vii) the provision of cash vault services;
(viii) the wiring of money;
(ix) the exchange of foreign currency, digital currency, or digital assets; or
(x) the sourcing, pooling, organization, or management of capital in association with the formation, operation, or management of, or investment in, a corporation, limited liability company, trust, foundation, limited liability partnership, partnership, or other similar entity;
The pool of covered individuals continues through subsection (D), but you get the idea. Covered individuals would be required to collect and report beneficial ownership information, report any suspicious transactions, and establish anti-money laundering policies.
In terms of enforcement, covered individuals would be subject to Treasury audits initially, but the Act requires Treasury to make recommendations for additional enforcement activities after a year. By way of example, the related Corporate Transparency Act imposes fines up to $10,000 and jail time up to two years for failing to make the appropriate reports.
The stated purpose of this effort is to help Treasury and law enforcement identify illegal activities taking place within businesses and investments but, as with the CTA, it’s highly unlikely that criminals engaged in such conduct will self-report their crimes.
Instead, the burden will fall on the millions of law-abiding business owners and investors who will be forced to comply with these new reporting requirements.
The irony is that this legislation is being rushed through Congress before the CTA has even taken effect. Final rules for implementing the CTA are due out this month, and once they are finalized, an estimated five to six million businesses will be required to annually report the personal information of their owners to Treasury. The ENABLERS Act would expand those reporting requirements to non-profits and larger businesses, while also increasing the total amount of information Treasury collects.
Proponents of this data grab claim the information will remain secure, private, and used solely for law-enforcement purposes, but the recent record suggests otherwise:
- Thousands of suspicious activity reports (SARs) were purposefully leaked out of FinCEN in 2020 in an obvious attempt to embarrass FinCEN and the reporting banks. The leaker was identified and punished, but by then the information was already public.
- Hundreds of tax returns of the wealthiest Americans were leaked to ProPublica, again for political purposes. This time, no leaker has been identified or punished.
- Just last month, an Ivy League professor testified before the Senate Banking Committee that the FinCEN database should be made public to enable political operatives to more easily target the owners of real estate and other businesses.
In other words, while the ENABLERS Act and CTA regulations will be marginally beneficial to law enforcement agencies, at best, the databases they produce can and will be used politically to name and shame the millions of covered business owners, non-profits, the professionals they work with and their employees.
As noted, the ENABLERS Act has passed the House as part of the National Defense Authorization Act and is awaiting consideration in the Senate. It’s a sneaky way to impose new regulations on businesses, and we expect the business community to strongly oppose this this data grab, much as it opposed the CTA. The question is, will anybody listen when we do?