The Treasury Department has not taken steps to address gaps in beneficial ownership reporting resulting from its decision to exempt U.S. companies from the requirements, the Government Accountability Office concluded in a new report.
Last year, the Financial Crimes Enforcement Network, which is part of the Treasury Department, issued a final rule removing the requirement for U.S. companies and persons to report beneficial ownership information to the agency under the Corporate Transparency Act. In its report, the GAO said U.S.-based shell companies can pose significant risks of illicit finance activity. FinCEN’s rule exempted more than 99% of entities that previously had to report.
The Treasury Department is statutorily required to provide information to law enforcement and to report to Congress on exempt entities that “are significantly abused for illicit finance,” GAO said.
“However, Treasury has not identified potential actions or taken steps to address gaps in beneficial ownership information resulting from the broadened reporting exemptions,” GAO said. “Doing so would better position policymakers and law enforcement to respond to potential shell company misuse while minimizing regulatory burden on legitimate businesses.”
The GAO recommended that the Treasury Department identify potential actions to address the risks posed by the exemptions and provide Congress and law enforcement “with highly useful information that addresses these risks.” The department disagreed with the recommendation, according to the report.
