Congress Overrides Trump Veto as Beneficial Ownership Registry Becomes Law
January 5, 2021
On a rare New Year's Day session, Congress voted to override President Trump's veto of the National Defense Authorization Act (NDAA). The president objected to the bill because it did not repeal Section 230 of the Communications Decency Act, which shields news and social media companies for their content moderation policies.
With the move, the law creates a new beneficial ownership registry for shell companies. ALTA members asked members of Congress to co-sponsor the bill during the 2019 ALTA Advocacy Summit.
“A requirement for companies to report their beneficial ownership to a national repository will help law enforcement identify and combat the use of real estate in money laundering without creating new compliance burdens,” said Diane Tomb, chief executive officer of ALTA. “This is integral for efforts to modernize the United States anti-money laundering rules and to help countering the financing of terrorist activity. Financial institutions with customer due diligence obligations will be able to access the FinCEN data with their customers' permission. This could help streamline reporting burdens of title insurance companies and give them more assurance that the information they report under Geographic Targeting Orders is accurate.”
With the law passed, FinCEN will get to work building the registry system. Over the next two years, shell companies will have to file their beneficial ownership information with FinCEN. The information will be updated whenever the company's ownership changes hands. There are a number of exemptions to the filing, especially if the company already has to file this information as part of an SEC or other financial regulatory requirement.
Title companies report beneficial ownership information to FinCEN as part of the Geographic Targeting Orders (GTOs). This is the one piece of information the industry does not have another business reason to collect and has no verification source.
Under the provision, once the beneficial ownership database is developed, financial institutions with customer due-diligence obligations (such as under the GTO rules) will be able to access the FinCEN data with their customers' permission. This could help streamline reporting burdens and give title companies more assurance that the information they report under GTOs is accurate. Additionally, once the database is established, FinCEN is supposed to re-evaluate its reporting requirements to reduce burdens, especially in instances where they are collecting the same information elsewhere.
ALTA will discuss with FinCEN how the GTOs may change given the new law.
Contact ALTA at 202-296-3671 or communications@alta.org.