Markets Wired

LEXINGTON – Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson and Acting Director of the Financial Crimes Enforcement Network Himamauli Das traveled to Lexington, Kentucky to join Representative Andy Barr (R-KY 6th District), Chairman of the House Subcommittee on Financial Institutions and Monetary Policy, for a discussion on Treasury’s illicit finance priorities with small businesses, financial institutions, and local law enforcement.

Public-private partnerships are critical to countering financial crimes like drug trafficking – particularly the trafficking of deadly fentanyl – and the forthcoming beneficial ownership information registry will be an important tool in keeping American businesses safe from abuse.

Remarks as Prepared for Delivery 

Good afternoon.  Thank you, Congressman Barr, for bringing us all together today.  As the Congressman mentioned, my name is Brian Nelson and I’m the Treasury Department’s Under Secretary for Terrorism and Financial Intelligence – or TFI as we call it. TFI is uniquely tasked with keeping the American financial system safe from illicit use, while simultaneously leveraging resources to target, disrupt, and dismantle the ability of rogue nations, terrorist facilitators, weapons of mass destruction (WMD) proliferators, money launderers, drug kingpins, and other national security threats to finance their operations. Under the umbrella of TFI exists five organizations with unique authorities and personnel skills designed to complement and collaborate with each other, spanning policy, intelligence, economic sanctions, asset forfeiture, and regulatory responsibilities.  I am pleased to be here today with TFI’s Financial Crimes Enforcement Network, or FinCEN’s, Acting Director Him Das. We appreciate the opportunity to meet with important partners to hear first-hand from those of you on the frontlines protecting our communities, engaging every day with customers, and providing vital financial services. I know we have information to share with you, but more importantly, I look forward to hearing from you about the successes you’ve had, the challenges you face, and where we may be able to partner together.

Today we will provide an overview of important ongoing work at the Treasury Department, particularly on our implementation of the Corporate Transparency Act, or CTA, which requires certain U.S. and foreign companies to report to FinCEN information about their beneficial owners – in other words, the persons who ultimately own or control the company, as well as our efforts to combat fentanyl trafficking. Both issues have been at the forefront of discussions happening across our country, whether among industry, local and state regulators, or law enforcement. While these issues may appear distinct and unrelated on the surface, that is not the case.  By exposing the true owners of legal entities here in the United States through the beneficial ownership reporting regime, we can more effectively uncover drug traffickers and their operations, including those who traffic fentanyl, who attempt to hide behind shell companies. I know we have a lot to get through, so I will turn to beneficial ownership first.

Beneficial Ownership Implementation

Illicit actors use opaque corporate structures to facilitate money laundering, corruption, sanctions and tax evasion, drug trafficking, fraud, and a host of other criminal offenses with impunity, while legitimate businesses and everyday Americans suffer from their misdeeds and unlawful competitive advantage.  These criminal actors impose real costs to the U.S. economy and take advantage of small businesses and American taxpayers. For example, criminals misuse legal entities like shell companies as part of tax evasion schemes—starving the country of critical funds for programs that repair our roadways and our bridges, rebuild our energy grid following devastating storms or flooding, and enable broadband expansion to every community in Kentucky and beyond. Such funds which in turn would enable opportunity, support small businesses, and bolster financial inclusion.

It should be no surprise then that Congress tasked the Treasury Department with tackling this issue – knowing that we would have the best interests of the American economy and those who drive it in mind. That means first and foremost the small businesses that are the engine that powers the American economy and of the economies of cities ranging in size from Lexington to Louisville to my small hometown of Upland, California where my father owned a laundromat, to larger cities like Los Angeles. 

It is why FinCEN is working around the clock to stand up this program in a way that allows you to understand your obligations, provides you the resources to meet them, and ensures the smallest possible burden on you. Not only will the increased transparency required by the CTA help honest U.S. businesses level the playing field against criminals who exploit vulnerabilities in our system to evade taxes, hide their illicit wealth, and defraud employees and customers, but it will also be critical in supporting our law enforcement and national security efforts across a full range of activities, including combatting fentanyl production and trafficking. We are particularly mindful of the costs to American companies, especially small businesses, that will result from the beneficial ownership information reporting requirements and have made, and will continue to make, every effort to minimize burdens where possible. We expect that most small businesses will have simple ownership and control structures, meaning that these types of businesses will only have one to two beneficial owners.  And that these will not change significantly over time. This will mean perhaps only one filing over the lifetime of that business at a cost similar or lower than what it costs to file your taxes if you currently use one of the e-filing tools.

However, we understand that these are new requirements that communities need to learn about from FinCEN, an organization you may have never interacted with before.  Because of that, we are working to partner with organizations that are more connected to the business community to bolster our outreach efforts. We will be standing up a contact center to assist small business owners in filing beneficial ownership reports, respond to questions from the public, and reduce regulatory burden. In fact, FinCEN has already published an initial set of guidance materials in the form of infographics, videos, and Frequently Asked Questions—FAQs—on its website and will soon be publishing a Small Entity Compliance Guide. This guide will describe in simple, easy-to-read language each provision of the Beneficial Ownership Information Reporting Rule, which implements the reporting requirements of the CTA and goes into effect January 1, 2024.  It will also provide answers to key questions, with checklists and other tools to assist businesses in complying with their reporting obligations. We have also developed a robust outreach strategy to disseminate information as broadly and as completely as possible to ensure everyone impacted has the information they need. We recognize, also, that protecting the security and confidentiality of this beneficial ownership information is a critical concern for businesses, especially in this era of increased cyber-related fraud and crime. Reporting companies can be confident that their sensitive information is protected in a secure, confidential database built to meet the highest security standards, and that only authorized users can access the information for authorized purposes – to protect national security and to fight crime. My FinCEN colleagues here today will provide more details on beneficial ownership implementation throughout our discussion.

Treasury Efforts to Combat Fentanyl

Before I turn it over to Acting Director Das, a few words about our efforts to combat fentanyl, which has decimated communities across the country. As we all know, the illicit drug trade in fentanyl and other synthetic opioids is a significant threat to our national security and economy, but even more so for our communities and families. Combatting this scourge is a top priority for the Biden-Harris Administration and Treasury plays a key role in our whole-of-government response. Treasury has a variety of tools to bring to bear against this crisis both as it concerns criminal actors abroad as well as here at home. We have used these tools to target every stage of the supply chain. We have continued to engage our foreign counterparts both bilaterally and multilaterally to expand international cooperation to disrupt all aspects of the supply chain and the flow of this deadly drug into our communities. While our government has many ways in which to begin to address this crisis, we recognize the important role the private sector plays identifying suspicious activity. This collaboration has helped identify valuable leads for law enforcement investigations and, in turn, has led to successful prosecutions. With that, I know our time today is limited, so I would like to turn it over to Acting Director Das.

###