[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 1978 Introduced in Senate (IS)]
<DOC>
116th CONGRESS
1st Session
S. 1978
To ensure that persons who form corporations or limited liability
companies in the United States disclose the beneficial owners of those
corporations or limited liability companies, in order to prevent
wrongdoers from exploiting United States corporations and limited
liability companies for criminal gain, to assist law enforcement in
detecting, preventing, and punishing terrorism, money laundering, and
other misconduct involving United States corporations and limited
liability companies, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 26, 2019
Mr. Wyden (for himself, Mr. Rubio, and Mr. Whitehouse) introduced the
following bill; which was read twice and referred to the Committee on
Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To ensure that persons who form corporations or limited liability
companies in the United States disclose the beneficial owners of those
corporations or limited liability companies, in order to prevent
wrongdoers from exploiting United States corporations and limited
liability companies for criminal gain, to assist law enforcement in
detecting, preventing, and punishing terrorism, money laundering, and
other misconduct involving United States corporations and limited
liability companies, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Corporate Transparency Act of
2019''.
SEC. 2. TRANSPARENT INCORPORATION PRACTICES.
(a) In General.--
(1) Amendment to the bank secrecy act.--Chapter 53 of title
31, United States Code, is amended by inserting after section
5332 the following new section:
``Sec. 5333. Transparent incorporation practices
``(a) Reporting Requirements.--
``(1) Beneficial ownership reporting.--
``(A) In general.--Each applicant to form a
corporation or limited liability company under the laws
of a State or Indian Tribe shall file a report with
FinCEN containing a list of the beneficial owners of
the corporation or limited liability company that--
``(i) except as provided in paragraph (3),
and subject to paragraph (2), identifies each
beneficial owner by--
``(I) full legal name;
``(II) date of birth;
``(III) current residential or
business street address; and
``(IV) a unique identifying number
from a non-expired passport issued by
the United States, a non-expired
personal identification card, or a non-
expired driver's license issued by a
State; and
``(ii) if the applicant is not a beneficial
owner, also provides the identification
information described in clause (i) relating to
such applicant.
``(B) Updated information.--Each corporation or
limited liability company formed under the laws of a
State or Indian Tribe shall--
``(i) submit to FinCEN an annual filing
containing a list of--
``(I) the current beneficial owners
of the corporation or limited liability
company and the information described
in subparagraph (A) for each such
beneficial owner; and
``(II) any changes in the
beneficial owners of the corporation or
limited liability company during the
previous year; and
``(ii) pursuant to any rule issued by the
Secretary of the Treasury under subparagraph
(C), update the list of the beneficial owners
of the corporation or limited liability company
within the time period prescribed by such rule.
``(C) Rulemaking on updating information.--Not
later than 9 months after the completion of the study
required under section 3(a)(1) of the Corporate
Transparency Act of 2019, the Secretary of the Treasury
shall consider the findings of such study and, if the
Secretary determines it to be necessary or appropriate,
issue a rule requiring corporations and limited
liability companies to update the list of the
beneficial owners of the corporation or limited
liability company within a specified amount of time
after the date of any change in the list of beneficial
owners or the information required to be provided
relating to each beneficial owner.
``(D) State notification.--Each State in which a
corporation or limited liability company is being
formed shall notify each applicant of the requirements
listed in subparagraphs (A) and (B).
``(2) Certain beneficial owners.--If an applicant to form a
corporation or limited liability company or a beneficial owner,
or similar agent of a corporation or limited liability company
who is required to provide identification information under
this subsection, does not have a non-expired passport issued by
the United States, a non-expired personal identification card,
or a non-expired driver's license issued by a State, each such
person shall provide to FinCEN the full legal name, current
residential or business street address, a unique identifying
number from a non-expired passport issued by a foreign
government, and a legible and credible copy of the pages of a
non-expired passport issued by the government of a foreign
country bearing a photograph, date of birth, and unique
identifying information for each beneficial owner, and each
application described in paragraph (1)(A) and each update
described in paragraph (1)(B) shall include a written
certification by a person residing in the State or Indian
country under the jurisdiction of the Indian Tribe forming the
entity that the applicant, corporation, or limited liability
company--
``(A) has obtained for each such beneficial owner,
a current residential or business street address and a
legible and credible copy of the pages of a non-expired
passport issued by the government of a foreign country
bearing a photograph, date of birth, and unique
identifying information for the person;
``(B) has verified the full legal name, address,
and identity of each such person;
``(C) will provide the information described in
subparagraph (A) and the proof of verification
described in subparagraph (B) upon request of FinCEN;
and
``(D) will retain the information and proof of
verification under this paragraph until the end of the
5-year period beginning on the date that the
corporation or limited liability company terminates
under the laws of the State or Indian Tribe.
``(3) Exempt entities.--
``(A) In general.--With respect to an applicant to
form a corporation or limited liability company under
the laws of a State or Indian Tribe, if such entity is
described in subparagraph (C) or (D) of subsection
(d)(4) and will be exempt from the beneficial ownership
disclosure requirements under this subsection, such
applicant, or a prospective officer, director, or
similar agent of the applicant, shall file a written
certification with FinCEN--
``(i) identifying the specific provision of
subsection (d)(4) under which the entity
proposed to be formed would be exempt from the
beneficial ownership disclosure requirements
under paragraphs (1) and (2);
``(ii) stating that the entity proposed to
be formed meets the requirements for an entity
described under such provision of subsection
(d)(4); and
``(iii) providing identification
information for the applicant or prospective
officer, director, or similar agent making the
certification in the same manner as provided
under paragraph (1) or (2).
``(B) Existing corporations or limited liability
companies.--On and after the date that is 2 years after
the final regulations are issued to carry out this
section, a corporation or limited liability company
formed under the laws of the State or Indian Tribe
before such date shall be subject to the requirements
of this subsection unless an officer, director, or
similar agent of the entity submits to FinCEN a written
certification--
``(i) identifying the specific provision of
subsection (d)(4) under which the entity is
exempt from the requirements under paragraphs
(1) and (2);
``(ii) stating that the entity meets the
requirements for an entity described under such
provision of subsection (d)(4); and
``(iii) providing identification
information for the officer, director, or
similar agent making the certification in the
same manner as provided under paragraph (1) or
(2).
``(C) Exempt entities having ownership interest.--
If an entity described in subparagraph (C) or (D) of
subsection (d)(4) has or will have an ownership
interest in a corporation or limited liability company
formed or to be formed under the laws of a State or
Indian Tribe, the applicant, corporation, or limited
liability company in which the entity has or will have
the ownership interest shall provide the information
required under this subsection relating to the entity,
except that the entity shall not be required to provide
information regarding any natural person who has an
ownership interest in, exercises substantial control
over, or receives substantial economic benefits from
the entity.
``(4) Retention and disclosure of beneficial ownership
information by fincen.--
``(A) Retention of information.--Beneficial
ownership information relating to each corporation or
limited liability company formed under the laws of the
State or Indian Tribe shall be maintained by FinCEN
until the end of the 5-year period (or such other
period of time as the Secretary of the Treasury may, by
rule, determine) beginning on the date that the
corporation or limited liability company terminates.
``(B) Disclosure of information.--Beneficial
ownership information reported to FinCEN pursuant to
this section shall be provided by FinCEN only upon
receipt of--
``(i) subject to subparagraph (C), a
request, through appropriate protocols, by a
local, Tribal, State, or Federal law
enforcement agency;
``(ii) a request made by a Federal agency
on behalf of a law enforcement agency of
another country under an international treaty,
agreement, or convention, or an order under
section 3512 of title 18 or section 1782 of
title 28; or
``(iii) a request made by a financial
institution, with customer consent, as part of
the institution's compliance with due diligence
requirements imposed under the Bank Secrecy
Act, the USA PATRIOT Act, or other applicable
Federal, State, or Tribal law.
``(C) Appropriate protocols.--
``(i) Privacy.--The protocols described in
subparagraph (B)(i) shall protect the privacy
of any beneficial ownership information
provided by FinCEN to a local, Tribal, State,
or Federal law enforcement agency.
``(ii) Limitation on use.--Beneficial
ownership information provided to a local,
Tribal, State, or Federal law enforcement
agency under this paragraph may only be used
for law enforcement, national security, or
intelligence purposes.
``(b) No Bearer Share Corporations or Limited Liability
Companies.--A corporation or limited liability company formed under the
laws of a State or Indian Tribe may not issue a certificate in bearer
form evidencing either a whole or fractional interest in the
corporation or limited liability company.
``(c) Penalties.--
``(1) In general.--It shall be unlawful for any person to
affect interstate or foreign commerce by--
``(A) knowingly providing, or attempting to
provide, false or fraudulent beneficial ownership
information, including a false or fraudulent
identifying photograph, to FinCEN in accordance with
this section;
``(B) willfully failing to provide complete or
updated beneficial ownership information to FinCEN in
accordance with this section; or
``(C) knowingly disclosing the existence of a
subpoena or other request for beneficial ownership
information reported pursuant to this section, except--
``(i) to the extent necessary to fulfill
the authorized request; or
``(ii) as authorized by the entity that
issued the subpoena, or other request.
``(2) Civil and criminal penalties.--Any person who
violates paragraph (1)--
``(A) shall be liable to the United States for a
civil penalty of not more than $10,000; and
``(B) may be fined under title 18, imprisoned for
not more than 3 years, or both.
``(3) Limitation.--Any person who negligently violates
paragraph (1) shall not be subject to civil or criminal
penalties under paragraph (2).
``(4) Waiver.--The Secretary of the Treasury may waive the
penalty for violating paragraph (1) if the Secretary determines
that the violation was due to reasonable cause and was not due
to willful neglect.
``(5) Criminal penalty for the misuse or unauthorized
disclosure of beneficial ownership information.--The criminal
penalties provided for under section 5322 shall apply to a
violation of this section to the same extent as such criminal
penalties apply to a violation described in section 5322, if
the violation of this section consists of the misuse or
unauthorized disclosure of beneficial ownership information.
``(d) Definitions.--For the purposes of this section:
``(1) Applicant.--The term `applicant' means any natural
person who files an application to form a corporation or
limited liability company under the laws of a State or Indian
Tribe.
``(2) Bank secrecy act.--The term `Bank Secrecy Act'
means--
``(A) section 21 of the Federal Deposit Insurance
Act (12 U.S.C. 1829b);
``(B) chapter 2 of title I of Public Law 91-508 (12
U.S.C. 1951 et seq.); and
``(C) this subchapter.
``(3) Beneficial owner.--
``(A) In general.--Except as provided in
subparagraph (B), the term `beneficial owner' means a
natural person who, directly or indirectly, through any
contract, arrangement, understanding, relationship, or
otherwise--
``(i) exercises substantial control over a
corporation or limited liability company;
``(ii) owns 25 percent or more of the
equity interests of a corporation or limited
liability company; or
``(iii) receives substantial economic
benefits from the assets of a corporation or
limited liability company.
``(B) Exceptions.--The term `beneficial owner'
shall not include--
``(i) a minor child, as defined in the
State or Indian Tribe in which the entity is
formed;
``(ii) a person acting as a nominee,
intermediary, custodian, or agent on behalf of
another person;
``(iii) a person acting solely as an
employee of a corporation or limited liability
company and whose control over or economic
benefits from the corporation or limited
liability company derives solely from the
employment status of the person;
``(iv) a person whose only interest in a
corporation or limited liability company is
through a right of inheritance;
``(v) a creditor of a corporation or
limited liability company, unless the creditor
also meets the requirements of subparagraph
(A); or
``(vi) a person whose ownership interest is
below a de minimis threshold that the Secretary
of the Treasury shall, by rule, establish.
``(C) Substantial economic benefits defined.--
``(i) In general.--For purposes of
subparagraph (A)(iii), a natural person
receives substantial economic benefits from the
assets of a corporation or limited liability
company if the person has an entitlement to
more than a specified percentage of the funds
or assets of the corporation or limited
liability company, which the Secretary of the
Treasury shall, by rule, establish.
``(ii) Rulemaking criteria.--In
establishing the percentage under clause (i),
the Secretary of the Treasury shall seek to--
``(I) provide clarity to
corporations and limited liability
companies with respect to the
identification and disclosure of a
natural person who receives substantial
economic benefits from the assets of a
corporation or limited liability
company; and
``(II) identify those natural
persons who, as a result of the
substantial economic benefits they
receive from the assets of a
corporation or limited liability
company, exercise a dominant influence
over such corporation or limited
liability company.
``(4) Corporation; limited liability company.--The terms
`corporation' and `limited liability company'--
``(A) have the meanings given such terms under the
laws of the applicable State or Indian Tribe;
``(B) include any non-United States entity eligible
for registration or registered to do business as a
corporation or limited liability company under the laws
of the applicable State or Indian Tribe;
``(C) do not include any entity that is--
``(i) a business concern that is an issuer
of a class of securities registered under
section 12 of the Securities Exchange Act of
1934 (15 U.S.C. 781) or that is required to
file reports under section 15(d) of that Act
(15 U.S.C. 78o(d));
``(ii) a business concern constituted,
sponsored, or chartered by a State or Indian
Tribe, a political subdivision of a State or
Indian Tribe, under an interstate compact
between two or more States, by a department or
agency of the United States, or under the laws
of the United States;
``(iii) a depository institution (as
defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813));
``(iv) a credit union (as defined in
section 101 of the Federal Credit Union Act (12
U.S.C. 1752));
``(v) a bank holding company (as defined in
section 2 of the Bank Holding Company Act of
1956 (12 U.S.C. 1841));
``(vi) a broker or dealer (as defined in
section 3 of the Securities Exchange Act of
1934 (15 U.S.C. 78c)) that is registered under
section 15 of the Securities Exchange Act of
1934 (15 U.S.C. 78o);
``(vii) an exchange or clearing agency (as
defined in section 3 of the Securities Exchange
Act of 1934 (15 U.S.C. 78c)) that is registered
under section 6 or 17A of the Securities
Exchange Act of 1934 (15 U.S.C. 78f, 78q-1);
``(viii) an investment company (as defined
in section 3 of the Investment Company Act of
1940 (15 U.S.C. 80a-3)) or an investment
adviser (as defined in section 202(11) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-
2(11))), if the company or adviser is
registered with the Securities and Exchange
Commission, or has filed an application for
registration which has not been denied, under
the Investment Company Act of 1940 (15 U.S.C.
80a-1 et seq.) or the Investment Advisers Act
of 1940 (15 U.S.C. 80b-1 et seq.);
``(ix) an insurance company (as defined in
section 2 of the Investment Company Act of 1940
(15 U.S.C. 80a-2));
``(x) a registered entity (as defined in
section 1a of the Commodity Exchange Act (7
U.S.C. 1a)), or a futures commission merchant,
introducing broker, commodity pool operator, or
commodity trading advisor (as defined in
section 1a of the Commodity Exchange Act (7
U.S.C. 1a)) that is registered with the
Commodity Futures Trading Commission;
``(xi) a public accounting firm registered
in accordance with section 102 of the Sarbanes-
Oxley Act (15 U.S.C. 7212) or an entity
controlling, controlled by, or under common
control of such a firm;
``(xii) a public utility that provides
telecommunications service, electrical power,
natural gas, or water and sewer services,
within the United States;
``(xiii) a church, charity, nonprofit
entity, or other organization that is described
in section 501(c), 527, or 4947(a)(1) of the
Internal Revenue Code of 1986, that has not
been denied tax exempt status, and that has
filed the most recently due annual information
return with the Internal Revenue Service, if
required to file such a return;
``(xiv) any business concern that--
``(I) employs more than 20
employees on a full-time basis in the
United States;
``(II) files income tax returns in
the United States demonstrating more
than $5,000,000 in gross receipts or
sales; and
``(III) has an operating presence
at a physical office within the United
States; or
``(xv) any corporation or limited liability
company formed and owned by an entity described
in clause (i), (ii), (iii), (iv), (v), (vi),
(vii), (viii), (ix), (x), (xi), (xii), (xiii),
or (xiv); and
``(D) do not include any individual business
concern or class of business concerns which the
Secretary of the Treasury and the Attorney General of
the United States have jointly determined, by rule of
otherwise, to be exempt from the requirements of
subsection (a), if the Secretary and the Attorney
General jointly determine that requiring beneficial
ownership information from the business concern would
not serve the public interest and would not assist law
enforcement efforts to detect, prevent, or prosecute
terrorism, money laundering, tax evasion, or other
misconduct.
``(5) Fincen.--The term `FinCEN' means the Financial Crimes
Enforcement Network of the Department of the Treasury.
``(6) Indian country.--The term `Indian country' has the
meaning given that term in section 1151 of title 18.
``(7) Indian tribe.--The term `Indian Tribe' has the
meaning given that term under section 102 of the Federally
Recognized Indian Tribe List Act of 1994 (25 U.S.C. 5130).
``(8) Personal identification card.--The term `personal
identification card' means an identification document issued by
a State, Indian Tribe, or local government to an individual
solely for the purpose of identification of that individual.
``(9) State.--The term `State' means any State,
commonwealth, territory, or possession of the United States,
the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, American Samoa,
Guam, or the United States Virgin Islands.''.
(2) Rulemaking.--
(A) In general.--Not later than 1 year after the
date of enactment of this Act, the Secretary of the
Treasury shall issue regulations to carry out this Act
and the amendments made by this Act, including, to the
extent necessary, to clarify the definitions in section
5333(d) of title 31, United States Code.
(B) Revision of final rule.--Not later than 1 year
after the date of enactment of this Act, the Secretary
of the Treasury shall revise the final rule titled
``Customer Due Diligence Requirements for Financial
Institutions'' (May 11, 2016; 81 Fed. Reg. 29397) to--
(i) bring the rule into conformance with
this Act and the amendments made by this Act;
(ii) account for financial institutions'
access to comprehensive beneficial ownership
information filed by corporations and limited
liability companies, under threat of civil and
criminal penalties, under this Act and the
amendments made by this Act; and
(iii) reduce any burdens on financial
institutions that are, in light of the
enactment of this Act and the amendments made
by this Act, unnecessary or duplicative.
(3) Conforming amendments.--Title 31, United States Code,
is amended--
(A) in section 5321(a)--
(i) in paragraph (1), by striking
``sections 5314 and 5315'' each place it
appears and inserting ``sections 5314, 5315,
and 5333''; and
(ii) in paragraph (6), by inserting
``(except section 5333)'' after ``subchapter''
each place it appears; and
(B) in section 5322, by striking ``section 5315 or
5324'' each place it appears and inserting ``section
5315, 5324, or 5333''.
(4) Table of contents.--The table of contents of chapter 53
of title 31, United States Code, is amended by inserting after
the item relating to section 5332 the following:
``Sec. 5333. Transparent incorporation practices.''.
(b) Funding Authorization.--
(1) In general.--To carry out section 5333 of title 31,
United States Code, as added by subsection (a), funds shall be
made available to the Financial Crimes Enforcement Network (in
this subsection referred to as ``FinCEN'') to pay reasonable
costs relating to compliance with the requirements of such
section.
(2) Funding sources.--Funds shall be provided to FinCEN to
carry out the purposes described in paragraph (1) from one or
more of the following sources:
(A) Upon application by FinCEN, and without further
appropriation, the Secretary of the Treasury shall make
available to the FinCEN unobligated balances described
in section 9705(g)(4)(B) of title 31, United States
Code, in the Department of the Treasury Forfeiture Fund
established under section 9705(a) of title 31, United
States Code.
(B) Upon application by FinCEN, after consultation
with the Secretary of the Treasury, and without further
appropriation, the Attorney General of the United
States shall make available to FinCEN excess
unobligated balances (as defined in section
524(c)(8)(D) of title 28, United States Code) in the
Department of Justice Assets Forfeiture Fund
established under section 524(c) of title 28, United
States Code.
(3) Maximum amounts.--
(A) Department of the treasury.--The Secretary of
the Treasury may not make available to FinCEN a total
of more than $30,000,000 under paragraph (2)(A).
(B) Department of justice.--The Attorney General of
the United States may not make available to FinCEN a
total of more than $10,000,000 under paragraph (2)(B).
(c) Federal Contractors.--Not later than the first day of the first
full fiscal year beginning at least 1 year after the date of enactment
of this Act, the Administrator for Federal Procurement Policy shall
revise the Federal Acquisition Regulation maintained under section
1303(a)(1) of title 41, United States Code, to require any contractor
or subcontractor who is subject to the requirement to disclose
beneficial ownership information under section 5333 of title 31, United
States Code, as added by subsection (a), to provide the information
required to be disclosed under such section to the Federal Government
as part of any bid or proposal for a contract with a value threshold in
excess of the simplified acquisition threshold under section 134 of
title 41, United States Code.
SEC. 3. STUDIES AND REPORTS.
(a) Updating of Beneficial Ownership Information.--
(1) Study.--The Secretary of the Treasury, in consultation
with the Attorney General of the United States, shall conduct a
study to evaluate--
(A) the necessity of a requirement for corporations
and limited liability companies to update the list of
their beneficial owners within a specified amount of
time after the date of any change in the list of
beneficial owners or the information required to be
provided relating to each beneficial owner, taking into
account the annual filings required under section
5333(a)(1)(B)(i) of title 31, United States Code, as
added by section (2(a), and the information contained
in such annual filings; and
(B) the burden that a requirement to update the
list of beneficial owners within a specified period of
time after a change in such list of beneficial owners
would impose on corporations and limited liability
companies.
(2) Report.--Not later than 1 year after the date of
enactment of this Act, the Secretary of the Treasury shall
submit a report on the study required under paragraph (1) to
the Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on Financial Services of the House of
Representatives.
(3) Public comment.--The Secretary of the Treasury shall
seek and consider public input, comments, and data in order to
conduct the study required under paragraph (1).
(b) Other Legal Entities.--Not later than 2 years after the date of
enactment of this Act, the Comptroller General of the United States
shall conduct a study and submit to Congress a report--
(1) identifying each State or Indian Tribe that has
procedures that enable persons to form or register under the
laws of the State or Indian Tribe partnerships, trusts, or
other legal entities, and the nature of those procedures;
(2) identifying each State or Indian Tribe that requires
persons seeking to form or register partnerships, trusts, or
other legal entities under the laws of the State or Indian
Tribe to provide information about the beneficial owners (as
that term is defined in section 5333(d)(1) of title 31, United
States Code, as added by section 2(a)) or beneficiaries of such
entities, and the nature of the required information;
(3) evaluating whether the lack of available beneficial
ownership information for partnerships, trusts, or other legal
entities--
(A) raises concerns about the involvement of such
entities in terrorism, money laundering, tax evasion,
securities fraud, or other misconduct; and
(B) has impeded investigations into entities
suspected of such misconduct; and
(4) evaluating whether the failure of the United States to
require beneficial ownership information for partnerships and
trusts formed or registered in the United States has elicited
international criticism and what steps, if any, the United
States has taken or is planning to take in response.
(c) Effectiveness of Incorporation Practices.--Not later than 5
years after the date of enactment of this Act, the Comptroller General
of the United States shall conduct a study and submit to Congress a
report assessing the effectiveness of incorporation practices
implemented under this Act and the amendments made by this Act in--
(1) providing law enforcement agencies with prompt access
to reliable, useful, and complete beneficial ownership
information; and
(2) strengthening the capability of law enforcement
agencies to combat incorporation abuses, civil and criminal
misconduct, and detect, prevent, or punish terrorism, money
laundering, tax evasion, or other misconduct.
(d) Definitions.--In this section, the terms ``beneficial owner'',
``corporation'', and ``limited liability company'' have the meanings
given those terms under section 5333(d) of title 31, United States
Code, as added by section 2(a).
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