Corporate Transparency Act of 2019

IIB 116TH CONGRESS 1ST SESSION H. R. 2513 IN THE SENATE OF THE UNITED STATES OCTOBER 23, 2019 Received; read twice and referred to the Committee on Banking, Housing, and Urban Affairs AN ACT To ensure that persons who form corporations or limited liability companies in the United States disclose the bene- ficial owners of those corporations or limited liability companies, in order to prevent wrongdoers from exploit- ing United States corporations and limited liability com- panies 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. VerDate Sep 11 2014 00:38 Oct 24, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 2 HR 2513 RFS Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 DIVISION A—CORPORATE 3 TRANSPARENCY ACT OF 2019 4 SECTION 1. SHORT TITLE. 5 (a) IN GENERAL.—This Act may be cited as the 6 ‘‘Corporate Transparency Act of 2019’’. 7 (b) REFERENCES TO THIS ACT.—In this division— 8 (1) any reference to ‘‘this Act’’ shall be deemed 9 a reference to ‘‘this division’’; and 10 (2) except as otherwise expressly provided, any 11 reference to a section or other provision shall be 12 deemed a reference to that section or other provision 13 of this division. 14 SEC. 2. FINDINGS. 15 Congress finds the following: 16 (1) Nearly 2,000,000 corporations and limited 17 liability companies are being formed under the laws 18 of the States each year. 19 (2) Very few States require information about 20 the beneficial owners of the corporations and limited 21 liability companies formed under their laws. 22 (3) A person forming a corporation or limited 23 liability company within the United States typically 24 provides less information at the time of incorpora- 25 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 3 HR 2513 RFS tion than is needed to obtain a bank account or driv- 1 er’s license and typically does not name a single ben- 2 eficial owner. 3 (4) Criminals have exploited State formation 4 procedures to conceal their identities when forming 5 corporations or limited liability companies in the 6 United States, and have then used the newly created 7 entities to commit crimes affecting interstate and 8 international commerce such as terrorism, prolifera- 9 tion financing, drug and human trafficking, money 10 laundering, tax evasion, counterfeiting, piracy, secu- 11 rities fraud, financial fraud, and acts of foreign cor- 12 ruption. 13 (5) Law enforcement efforts to investigate cor- 14 porations and limited liability companies suspected 15 of committing crimes have been impeded by the lack 16 of available beneficial ownership information, as doc- 17 umented in reports and testimony by officials from 18 the Department of Justice, the Department of 19 Homeland Security, the Department of the Treas- 20 ury, and the Government Accountability Office, and 21 others. 22 (6) In July 2006, the leading international 23 antimoney laundering standard-setting body, the Fi- 24 nancial Action Task Force on Money Laundering (in 25 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 4 HR 2513 RFS this section referred to as the ‘‘FATF’’), of which 1 the United States is a member, issued a report that 2 criticizes the United States for failing to comply 3 with a FATF standard on the need to collect bene- 4 ficial ownership information and urged the United 5 States to correct this deficiency by July 2008. In 6 December 2016, FATF issued another evaluation of 7 the United States, which found that little progress 8 has been made over the last ten years to address 9 this problem. It identified the ‘‘lack of timely access 10 to adequate, accurate and current beneficial owner- 11 ship information’’ as a fundamental gap in United 12 States efforts to combat money laundering and ter- 13 rorist finance. 14 (7) In response to the 2006 FATF report, the 15 United States has urged the States to obtain bene- 16 ficial ownership information for the corporations and 17 limited liability companies formed under the laws of 18 such States. 19 (8) In contrast to practices in the United 20 States, all 28 countries in the European Union are 21 required to have corporate registries that include 22 beneficial ownership information. 23 (9) To reduce the vulnerability of the United 24 States to wrongdoing by United States corporations 25 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 5 HR 2513 RFS and limited liability companies with hidden owners, 1 to protect interstate and international commerce 2 from criminals misusing United States corporations 3 and limited liability companies, to strengthen law en- 4 forcement investigations of suspect corporations and 5 limited liability companies, to set a clear, universal 6 standard for State incorporation practices, and to 7 bring the United States into compliance with inter- 8 national anti-money laundering standards, Federal 9 legislation is needed to require the collection of bene- 10 ficial ownership information for the corporations and 11 limited liability companies formed under the laws of 12 such States. 13 SEC. 3. TRANSPARENT INCORPORATION PRACTICES. 14 (a) IN GENERAL.— 15 (1) AMENDMENT TO THE BANK SECRECY 16 ACT.—Chapter 53 of title 31, United States Code, is 17 amended by inserting after section 5332 the fol- 18 lowing new section: 19 ‘‘§ 5333 Transparent incorporation practices 20 ‘‘(a) REPORTING REQUIREMENTS.— 21 ‘‘(1) BENEFICIAL OWNERSHIP REPORTING.— 22 ‘‘(A) IN GENERAL.—Each applicant to 23 form a corporation or limited liability company 24 under the laws of a State or Indian Tribe shall 25 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 6 HR 2513 RFS file a report with FinCEN containing a list of 1 the beneficial owners of the corporation or lim- 2 ited liability company that— 3 ‘‘(i) except as provided in paragraphs 4 (3) and (4), and subject to paragraph (2), 5 identifies each beneficial owner by— 6 ‘‘(I) full legal name; 7 ‘‘(II) date of birth; 8 ‘‘(III) current residential or busi- 9 ness street address; and 10 ‘‘(IV) a unique identifying num- 11 ber from a non-expired passport 12 issued by the United States, a non-ex- 13 pired personal identification card, or a 14 non-expired driver’s license issued by 15 a State; and 16 ‘‘(ii) if the applicant is not a bene- 17 ficial owner, also provides the identification 18 information described in clause (i) relating 19 to such applicant. 20 ‘‘(B) UPDATED INFORMATION.—Each cor- 21 poration or limited liability company formed 22 under the laws of a State or Indian Tribe 23 shall— 24 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 7 HR 2513 RFS ‘‘(i) submit to FinCEN an annual fil- 1 ing containing a list of— 2 ‘‘(I) the current beneficial owners 3 of the corporation or limited liability 4 company and the information de- 5 scribed in subparagraph (A) for each 6 such beneficial owner; and 7 ‘‘(II) any changes in the bene- 8 ficial owners of the corporation or lim- 9 ited liability company during the pre- 10 vious year; and 11 ‘‘(ii) pursuant to any rule issued by 12 the Secretary of the Treasury under sub- 13 paragraph (C), update the list of the bene- 14 ficial owners of the corporation or limited 15 liability company within the time period 16 prescribed by such rule. 17 ‘‘(C) RULEMAKING ON UPDATING INFOR- 18 MATION.—Not later than 9 months after the 19 completion of the study required under section 20 4(a)(1) of the Corporate Transparency Act of 21 2019, the Secretary of the Treasury shall con- 22 sider the findings of such study and, if the Sec- 23 retary determines it to be necessary or appro- 24 priate, issue a rule requiring corporations and 25 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 8 HR 2513 RFS limited liability companies to update the list of 1 the beneficial owners of the corporation or lim- 2 ited liability company within a specified amount 3 of time after the date of any change in the list 4 of beneficial owners or the information required 5 to be provided relating to each beneficial owner. 6 ‘‘(D) STATE NOTIFICATION.—Each State 7 in which a corporation or limited liability com- 8 pany is being formed shall notify each applicant 9 of the requirements listed in subparagraphs (A) 10 and (B). 11 ‘‘(2) CERTAIN BENEFICIAL OWNERS.—If an ap- 12 plicant to form a corporation or limited liability com- 13 pany or a beneficial owner, or similar agent of a cor- 14 poration or limited liability company who is required 15 to provide identification information under this sub- 16 section, does not have a nonexpired passport issued 17 by the United States, a nonexpired personal identi- 18 fication card, or a non-expired driver’s license issued 19 by a State, each such person shall provide to 20 FinCEN the full legal name, current residential or 21 business street address, a unique identifying number 22 from a non-expired passport issued by a foreign gov- 23 ernment, and a legible and credible copy of the 24 pages of a non-expired passport issued by the gov- 25 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 9 HR 2513 RFS ernment of a foreign country bearing a photograph, 1 date of birth, and unique identifying information for 2 each beneficial owner, and each application described 3 in paragraph (1)(A) and each update described in 4 paragraph (1)(B) shall include a written certification 5 by a person residing in the State or Indian country 6 under the jurisdiction of the Indian Tribe forming 7 the entity that the applicant, corporation, or limited 8 liability company— 9 ‘‘(A) has obtained for each such beneficial 10 owner, a current residential or business street 11 address and a legible and credible copy of the 12 pages of a non-expired passport issued by the 13 government of a foreign country bearing a pho- 14 tograph, date of birth, and unique identifying 15 information for the person; 16 ‘‘(B) has verified the full legal name, ad- 17 dress, and identity of each such person; 18 ‘‘(C) will provide the information described 19 in subparagraph (A) and the proof of 20 verification described in subparagraph (B) upon 21 request of FinCEN; and 22 ‘‘(D) will retain the information and proof 23 of verification under this paragraph until the 24 end of the 5-year period beginning on the date 25 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 10 HR 2513 RFS that the corporation or limited liability company 1 terminates under the laws of the State or In- 2 dian Tribe. 3 ‘‘(3) EXEMPT ENTITIES.— 4 ‘‘(A) IN GENERAL.—With respect to an ap- 5 plicant to form a corporation or limited liability 6 company under the laws of a State or Indian 7 Tribe, if such entity is described in subpara- 8 graph (C) or (D) of subsection (d)(4) and will 9 be exempt from the beneficial ownership disclo- 10 sure requirements under this subsection, such 11 applicant, or a prospective officer, director, or 12 similar agent of the applicant, shall file a writ- 13 ten certification with FinCEN— 14 ‘‘(i) identifying the specific provision 15 of subsection (d)(4) under which the entity 16 proposed to be formed would be exempt 17 from the beneficial ownership disclosure re- 18 quirements under paragraphs (1) and (2); 19 ‘‘(ii) stating that the entity proposed 20 to be formed meets the requirements for 21 an entity described under such provision of 22 subsection (d)(4); and 23 ‘‘(iii) providing identification informa- 24 tion for the applicant or prospective offi- 25 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 11 HR 2513 RFS cer, director, or similar agent making the 1 certification in the same manner as pro- 2 vided under paragraph (1) or (2). 3 ‘‘(B) EXISTING CORPORATIONS OR LIM- 4 ITED LIABILITY COMPANIES.—On and after the 5 date that is 2 years after the final regulations 6 are issued to carry out this section, a corpora- 7 tion or limited liability company formed under 8 the laws of the State or Indian Tribe before 9 such date shall be subject to the requirements 10 of this subsection unless an officer, director, or 11 similar agent of the entity submits to FinCEN 12 a written certification— 13 ‘‘(i) identifying the specific provision 14 of subsection (d)(4) under which the entity 15 is exempt from the requirements under 16 paragraphs (1) and (2); 17 ‘‘(ii) stating that the entity meets the 18 requirements for an entity described under 19 such provision of subsection (d)(4); and 20 ‘‘(iii) providing identification informa- 21 tion for the officer, director, or similar 22 agent making the certification in the same 23 manner as provided under paragraph (1) 24 or (2). 25 VerDate Sep 11 2014 23:28 Oct 23, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2513.RFS H2513 SSpencer on DSKBBXCHB2PROD with BILLS 12 HR 2513 RFS ‘‘(C) EXEMPT ENTITIES HAVING OWNER- 1 SHIP INTEREST.—If an entity described in sub- 2 paragraph (C) or (D) of subsection (d)(4) has 3 or will have an ownership interest in a corpora- 4 tion or limited liability company formed or to be 5 formed under the laws of a State or Indian 6 Tribe, the applicant, corporation, or limited li- 7 ability company in which the entity has or will 8 have the ownership interest shall provide the in- 9 formation required under this subsection relat- 10 ing to the entity, except that the entity shall 11 not be required to provide information regard- 12 ing any natural person who has an ownership 13 interest in, exercises substantial control over, or 14 receives substantial economic benefits from the 15 entity. 16 ‘‘(4) FINCEN ID NUMBERS.— 17 ‘‘(A) ISSUANCE OF FINCEN ID NUMBER.— 18 ‘‘(i) IN GENERAL.—FinCEN shall 19 issue a FinCEN ID number to any indi- 20 vidual who requests such a number and [Text truncated for display. 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