Businesses have until the end of the year to file the initial Beneficial Ownership Information report with the Financial Crimes Enforcement Network as part of the Corporate Transparency Act.
The act, which started Jan. 1, is designed to combat illegal activity such as money laundering and financing for terrorism.
So far, about one-eighth of businesses have met the requirement, said Jim Daly, a managing director in accounting firm PwC’s financial crimes unit.
“To meet that deadline, it’s going to be an estimate of 450,000 legal entities filing a day until Dec. 31,” Daly said on Monday at the Global Gaming Expo in Las Vegas. “Everyone is putting this to the back end of the year.”
For most companies, the report is relatively simple. It requires the name, date of birth, home address and ID, such as a passport, of a company’s owners.
Failure to comply could result in a civil penalty of up to $5,000 a day as well as jail time for doing business without registering, according to the Financial Crimes Enforcement Network.
With millions of reports filed to the Financial Crimes Enforcement Network, Anne Layne, senior manager in risk advisory services at Grant Thornton, doesn’t expect enforcement to come immediately.
“For context, (the Financial Crimes Enforcement Network) is an organization of 250 professionals,” Daly said at the convention. “They don’t have the person power to attack this database.”
However, Daly said the network is more focused on rooting out suspicious and terroristic activity going through financial institutions and casinos, not “ticky-tack” violations like forgetting the street number of a property.
In a conversation with “professionals” in the crime enforcement network last week, Daly said he was told that “the first enforcement action is going to be very public, and it’s going to be for a very nefarious actor.”
Luke Rippee, the deputy chief of the Nevada Gaming Control Board’s Investigation Division, said the data could be a “beneficial tool” for his work. The division investigates the activity of Nevada’s gaming industry and provides reports for licensing decisions. However, Rippee doesn’t know if the Control Board will have access to the submitted data.
The dataset will also not include every American corporation as the Corporate Transparency Act has nearly two dozen exceptions.
Companies with at least 20 full-time employees in the U.S., an American address and over $5 million in sales are among those that won’t be required to file, according to the International Association of Commercial Administrators.
Speaking at FinCEN’s Virginia office in January, Treasury Secretary Janet Yellen said the CTA sends a clear message: “The United States is not a haven for dirty money.”
“Around the world, lack of transparency, specifically due to opaque corporate structures, makes it easier to conceal illicit activity,” Yellen said. “Criminals utilize front and shell companies to conceal and launder their ill-gotten gains,” leading to fraud, drug trafficking and the financing of terrorism.
Daly said the United States has been criticized for being a “secrecy haven,” with the international Financial Action Task Force reporting that the U.S. is fully compliant on only 9 of its 40 recommendations to prevent money laundering. America is “largely compliant” on 23 recommendations.
While the intent of the new law is to provide information to prevent fraud, Rob Kim, the event’s moderator and office managing partner at Las Vegas law firm Ballard Spahr, said bad actors wouldn’t report their illegal activity.
That could make the data less helpful than originally intended, Layne said.
“The question is, when you’re using (the data) for compliance … did we get into a ‘garbage in, garbage out’ scenario?” she said. “How reliable is this information actually going to be?”