ABA Offers Congressional Testimony on FinCEN’s Beneficial Ownership Rulemaking

The American Bankers Association today provided testimony to the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions on the banking industry’s views regarding FinCEN’s implementation of the Corporate Transparency Act’s (CTA) beneficial ownership requirements.

Pete Selenke, Vice President and Anti-Money Laundering/Bank Secrecy Act Officer of Central Bank in Jefferson City, Missouri, testified on behalf of ABA. Central Bank is a privately held $19 billion bank that employs nearly 3,000 employees at more than 150 branches in nine states.

In his testimony, Selenke emphasized that banks take the responsibility of protecting our nation’s financial system seriously, serving as partners to law enforcement and the U.S. government to prevent, detect, and prosecute international money laundering, the financing of terrorism, and other illicit uses of our financial system. Selenke also underscored ABA and its members’ support for the enactment of the Anti-Money Laundering Act (AMLA) of 2020, of which the CTA is a part, the most significant overhaul of the nation’s bank secrecy and anti-money laundering laws since the USA PATRIOT Act of 2001.

Selenke noted, however, that because the banking industry believes so strongly in the objectives of the AMLA, it is critical that FinCEN promulgates implementing regulations consistent with Congressional intent.

“Congress explicitly intended for the beneficial ownership information included in the registry to be accessed by banks, with their customers’ consent, for purposes of complying with the ‘customer due diligence’ requirements under applicable law,” Selenke said. “This directive is broad and clear. However, in the proposed rule FinCEN issued last December, the use restrictions FinCEN placed on this information make this beneficial ownership registry information useless to banks.”

Selenke added that limiting the use of beneficial ownership registry information so severely could cause banks to simply choose not to use this information at all.

“We do not believe this is an outcome Congress or FinCEN intended, and it is certainly not what banks want,” Selenke said.

In addition to the issue of access, Selenke reiterated concerns over the accuracy of the information within the registry.

“The bottom line is – the registry must be accurate and authoritative to be useful to banks or law enforcement, just as Congress intended,” Selenke said. “Banks want the registry to be useful. Given the enormous number of reporting companies, making the registry accurate must be the federal government’s responsibility. However, if the registry is not accurate and authoritative, banks must not be required to access it, and should not be held liable by our regulators for not seeking out beneficial ownership information.”

Lastly, Selenke underscored why it is critical that the federal government educate the newly regulated public about the forthcoming rules, especially given the significant penalties for non-compliance.

“If our customers do not know about the rule, they will not know they need to comply with it, which means they will be in a position to violate the rule,” Selenke said. “We take care of our customers, and we think of them as the good guys. The last thing we want is to see any rule risk turning good guys into bad guys because they failed to comply with a law they were not aware existed.”

Read Selenke’s full testimony.