Corporate Transparency Act of 2019

II 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 ex- ploiting 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 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 22:40 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 2 •S 1978 IS Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Corporate Trans- 4 parency Act of 2019’’. 5 SEC. 2. TRANSPARENT INCORPORATION PRACTICES. 6 (a) IN GENERAL.— 7 (1) AMENDMENT TO THE BANK SECRECY 8 ACT.—Chapter 53 of title 31, United States Code, is 9 amended by inserting after section 5332 the fol- 10 lowing new section: 11 ‘‘§ 5333. Transparent incorporation practices 12 ‘‘(a) REPORTING REQUIREMENTS.— 13 ‘‘(1) BENEFICIAL OWNERSHIP REPORTING.— 14 ‘‘(A) IN GENERAL.—Each applicant to 15 form a corporation or limited liability company 16 under the laws of a State or Indian Tribe shall 17 file a report with FinCEN containing a list of 18 the beneficial owners of the corporation or lim- 19 ited liability company that— 20 ‘‘(i) except as provided in paragraph 21 (3), and subject to paragraph (2), identi- 22 fies each beneficial owner by— 23 ‘‘(I) full legal name; 24 ‘‘(II) date of birth; 25 VerDate Sep 11 2014 21:03 Jul 03, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 3 •S 1978 IS ‘‘(III) current residential or busi- 1 ness street address; and 2 ‘‘(IV) a unique identifying num- 3 ber from a non-expired passport 4 issued by the United States, a non-ex- 5 pired personal identification card, or a 6 non-expired driver’s license issued by 7 a State; and 8 ‘‘(ii) if the applicant is not a bene- 9 ficial owner, also provides the identification 10 information described in clause (i) relating 11 to such applicant. 12 ‘‘(B) UPDATED INFORMATION.—Each cor- 13 poration or limited liability company formed 14 under the laws of a State or Indian Tribe 15 shall— 16 ‘‘(i) submit to FinCEN an annual fil- 17 ing containing a list of— 18 ‘‘(I) the current beneficial owners 19 of the corporation or limited liability 20 company and the information de- 21 scribed in subparagraph (A) for each 22 such beneficial owner; and 23 ‘‘(II) any changes in the bene- 24 ficial owners of the corporation or lim- 25 VerDate Sep 11 2014 22:40 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 4 •S 1978 IS ited liability company during the pre- 1 vious year; and 2 ‘‘(ii) pursuant to any rule issued by 3 the Secretary of the Treasury under sub- 4 paragraph (C), update the list of the bene- 5 ficial owners of the corporation or limited 6 liability company within the time period 7 prescribed by such rule. 8 ‘‘(C) RULEMAKING ON UPDATING INFOR- 9 MATION.—Not later than 9 months after the 10 completion of the study required under section 11 3(a)(1) of the Corporate Transparency Act of 12 2019, the Secretary of the Treasury shall con- 13 sider the findings of such study and, if the Sec- 14 retary determines it to be necessary or appro- 15 priate, issue a rule requiring corporations and 16 limited liability companies to update the list of 17 the beneficial owners of the corporation or lim- 18 ited liability company within a specified amount 19 of time after the date of any change in the list 20 of beneficial owners or the information required 21 to be provided relating to each beneficial owner. 22 ‘‘(D) STATE NOTIFICATION.—Each State 23 in which a corporation or limited liability com- 24 pany is being formed shall notify each applicant 25 VerDate Sep 11 2014 22:40 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 5 •S 1978 IS of the requirements listed in subparagraphs (A) 1 and (B). 2 ‘‘(2) CERTAIN BENEFICIAL OWNERS.—If an ap- 3 plicant to form a corporation or limited liability com- 4 pany or a beneficial owner, or similar agent of a cor- 5 poration or limited liability company who is required 6 to provide identification information under this sub- 7 section, does not have a non-expired passport issued 8 by the United States, a non-expired personal identi- 9 fication card, or a non-expired driver’s license issued 10 by a State, each such person shall provide to 11 FinCEN the full legal name, current residential or 12 business street address, a unique identifying number 13 from a non-expired passport issued by a foreign gov- 14 ernment, and a legible and credible copy of the 15 pages of a non-expired passport issued by the gov- 16 ernment of a foreign country bearing a photograph, 17 date of birth, and unique identifying information for 18 each beneficial owner, and each application described 19 in paragraph (1)(A) and each update described in 20 paragraph (1)(B) shall include a written certification 21 by a person residing in the State or Indian country 22 under the jurisdiction of the Indian Tribe forming 23 the entity that the applicant, corporation, or limited 24 liability company— 25 VerDate Sep 11 2014 21:03 Jul 03, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 6 •S 1978 IS ‘‘(A) has obtained for each such beneficial 1 owner, a current residential or business street 2 address and a legible and credible copy of the 3 pages of a non-expired passport issued by the 4 government of a foreign country bearing a pho- 5 tograph, date of birth, and unique identifying 6 information for the person; 7 ‘‘(B) has verified the full legal name, ad- 8 dress, and identity of each such person; 9 ‘‘(C) will provide the information described 10 in subparagraph (A) and the proof of 11 verification described in subparagraph (B) upon 12 request of FinCEN; and 13 ‘‘(D) will retain the information and proof 14 of verification under this paragraph until the 15 end of the 5-year period beginning on the date 16 that the corporation or limited liability company 17 terminates under the laws of the State or In- 18 dian Tribe. 19 ‘‘(3) EXEMPT ENTITIES.— 20 ‘‘(A) IN GENERAL.—With respect to an ap- 21 plicant to form a corporation or limited liability 22 company under the laws of a State or Indian 23 Tribe, if such entity is described in subpara- 24 graph (C) or (D) of subsection (d)(4) and will 25 VerDate Sep 11 2014 22:40 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 7 •S 1978 IS be exempt from the beneficial ownership disclo- 1 sure requirements under this subsection, such 2 applicant, or a prospective officer, director, or 3 similar agent of the applicant, shall file a writ- 4 ten certification with FinCEN— 5 ‘‘(i) identifying the specific provision 6 of subsection (d)(4) under which the entity 7 proposed to be formed would be exempt 8 from the beneficial ownership disclosure re- 9 quirements under paragraphs (1) and (2); 10 ‘‘(ii) stating that the entity proposed 11 to be formed meets the requirements for 12 an entity described under such provision of 13 subsection (d)(4); and 14 ‘‘(iii) providing identification informa- 15 tion for the applicant or prospective offi- 16 cer, director, or similar agent making the 17 certification in the same manner as pro- 18 vided under paragraph (1) or (2). 19 ‘‘(B) EXISTING CORPORATIONS OR LIM- 20 ITED LIABILITY COMPANIES.—On and after the 21 date that is 2 years after the final regulations 22 are issued to carry out this section, a corpora- 23 tion or limited liability company formed under 24 the laws of the State or Indian Tribe before 25 VerDate Sep 11 2014 22:40 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 8 •S 1978 IS such date shall be subject to the requirements 1 of this subsection unless an officer, director, or 2 similar agent of the entity submits to FinCEN 3 a written certification— 4 ‘‘(i) identifying the specific provision 5 of subsection (d)(4) under which the entity 6 is exempt from the requirements under 7 paragraphs (1) and (2); 8 ‘‘(ii) stating that the entity meets the 9 requirements for an entity described under 10 such provision of subsection (d)(4); and 11 ‘‘(iii) providing identification informa- 12 tion for the officer, director, or similar 13 agent making the certification in the same 14 manner as provided under paragraph (1) 15 or (2). 16 ‘‘(C) EXEMPT ENTITIES HAVING OWNER- 17 SHIP INTEREST.—If an entity described in sub- 18 paragraph (C) or (D) of subsection (d)(4) has 19 or will have an ownership interest in a corpora- 20 tion or limited liability company formed or to be 21 formed under the laws of a State or Indian 22 Tribe, the applicant, corporation, or limited li- 23 ability company in which the entity has or will 24 have the ownership interest shall provide the in- 25 VerDate Sep 11 2014 22:40 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 9 •S 1978 IS formation required under this subsection relat- 1 ing to the entity, except that the entity shall 2 not be required to provide information regard- 3 ing any natural person who has an ownership 4 interest in, exercises substantial control over, or 5 receives substantial economic benefits from the 6 entity. 7 ‘‘(4) RETENTION AND DISCLOSURE OF BENE- 8 FICIAL OWNERSHIP INFORMATION BY FINCEN.— 9 ‘‘(A) RETENTION OF INFORMATION.—Ben- 10 eficial ownership information relating to each 11 corporation or limited liability company formed 12 under the laws of the State or Indian Tribe 13 shall be maintained by FinCEN until the end of 14 the 5-year period (or such other period of time 15 as the Secretary of the Treasury may, by rule, 16 determine) beginning on the date that the cor- 17 poration or limited liability company termi- 18 nates. 19 ‘‘(B) DISCLOSURE OF INFORMATION.— 20 Beneficial ownership information reported to 21 FinCEN pursuant to this section shall be pro- 22 vided by FinCEN only upon receipt of— 23 ‘‘(i) subject to subparagraph (C), a 24 request, through appropriate protocols, by 25 VerDate Sep 11 2014 22:40 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 10 •S 1978 IS a local, Tribal, State, or Federal law en- 1 forcement agency; 2 ‘‘(ii) a request made by a Federal 3 agency on behalf of a law enforcement 4 agency of another country under an inter- 5 national treaty, agreement, or convention, 6 or an order under section 3512 of title 18 7 or section 1782 of title 28; or 8 ‘‘(iii) a request made by a financial 9 institution, with customer consent, as part 10 of the institution’s compliance with due 11 diligence requirements imposed under the 12 Bank Secrecy Act, the USA PATRIOT 13 Act, or other applicable Federal, State, or 14 Tribal law. 15 ‘‘(C) APPROPRIATE PROTOCOLS.— 16 ‘‘(i) PRIVACY.—The protocols de- 17 scribed in subparagraph (B)(i) shall pro- 18 tect the privacy of any beneficial ownership 19 information provided by FinCEN to a 20 local, Tribal, State, or Federal law enforce- 21 ment agency. 22 ‘‘(ii) LIMITATION ON USE.—Beneficial 23 ownership information provided to a local, 24 Tribal, State, or Federal law enforcement 25 VerDate Sep 11 2014 22:40 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 11 •S 1978 IS agency under this paragraph may only be 1 used for law enforcement, national secu- 2 rity, or intelligence purposes. 3 ‘‘(b) NO BEARER SHARE CORPORATIONS OR LIM- 4 ITED LIABILITY COMPANIES.—A corporation or limited li- 5 ability company formed under the laws of a State or In- 6 dian Tribe may not issue a certificate in bearer form evi- 7 dencing either a whole or fractional interest in the cor- 8 poration or limited liability company. 9 ‘‘(c) PENALTIES.— 10 ‘‘(1) IN GENERAL.—It shall be unlawful for any 11 person to affect interstate or foreign commerce by— 12 ‘‘(A) knowingly providing, or attempting to 13 provide, false or fraudulent beneficial ownership 14 information, including a false or fraudulent 15 identifying photograph, to FinCEN in accord- 16 ance with this section; 17 ‘‘(B) willfully failing to provide complete or 18 updated beneficial ownership information to 19 FinCEN in accordance with this section; or 20 ‘‘(C) knowingly disclosing the existence of 21 a subpoena or other request for beneficial own- 22 ership information reported pursuant to this 23 section, except— 24 VerDate Sep 11 2014 22:40 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1978.IS S1978 kjohnson on DSK79L0C42 with BILLS 12 •S 1978 IS ‘‘(i) to the extent necessary to fulfill 1 the authorized request; or 2 ‘‘(ii) as authorized by the entity that 3 issued the subpoena, or other request. 4 ‘‘(2) CIVIL AND CRIMINAL PENALTIES.—Any 5 person who violates paragraph (1)— 6 ‘‘(A) shall be liable to the United States 7 for a civil penalty of not more than $10,000; 8 and 9 ‘‘(B) may be fined under title 18, impris- 10 oned for not more than 3 years, or both. 11 ‘‘(3) LIMITATION.—Any person who negligently 12 violates paragraph (1) shall not be subject to civil or 13 criminal penalties under paragraph (2). 14 ‘‘(4) WAIVER.—The Secretary of the Treasury 15 may waive the penalty for violating paragraph (1) if 16 the Secretary determines that the violation was due 17 to reasonable cause and was not due to willful ne- 18 glect. 19 ‘‘(5) [Text truncated for display. Full text available on Congress.gov.]