[House Report 116-227]
[From the U.S. Government Publishing Office]


116th Congress    }                                     {      Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                     {     116-227

======================================================================



 
                   CORPORATE TRANSPARENCY ACT OF 2019

                                _______
                                

October 8, 2019.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Ms. Waters, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 2513]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2513) 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 exploiting 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, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................    10
Background and Need for Legislation..............................    10
Section-by-Section Analysis......................................    12
Hearings.........................................................    18
Committee Consideration..........................................    18
Committee Votes..................................................    19
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................    23
Statement of Performance Goals and Objectives....................    23
New Budget Authority and CBO Cost Estimate.......................    23
Committee Cost Estimate..........................................    27
Unfunded Mandate Statement.......................................    27
Advisory Committee...............................................    27
Committee Correspondence.........................................    27
Application of Law to the Legislative Branch.....................    27
Earmark Statement................................................    27
Duplication of Federal Programs..................................    27
Changes to Existing Law..........................................    28

    The amendment is as follows:
  Srtike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Corporate Transparency Act of 2019''.

SEC. 2. FINDINGS.

  Congress finds the following:
          (1) Nearly 2,000,000 corporations and limited liability 
        companies are being formed under the laws of the States each 
        year.
          (2) Very few States require information about the beneficial 
        owners of the corporations and limited liability companies 
        formed under their laws.
          (3) A person forming a corporation or limited liability 
        company within the United States typically provides less 
        information at the time of incorporation than is needed to 
        obtain a bank account or driver's license and typically does 
        not name a single beneficial owner.
          (4) Criminals have exploited State formation procedures to 
        conceal their identities when forming corporations or limited 
        liability companies in the United States, and have then used 
        the newly created entities to commit crimes affecting 
        interstate and international commerce such as terrorism, 
        proliferation financing, drug and human trafficking, money 
        laundering, tax evasion, counterfeiting, piracy, securities 
        fraud, financial fraud, and acts of foreign corruption.
          (5) Law enforcement efforts to investigate corporations and 
        limited liability companies suspected of committing crimes have 
        been impeded by the lack of available beneficial ownership 
        information, as documented in reports and testimony by 
        officials from the Department of Justice, the Department of 
        Homeland Security, the Department of the Treasury, and the 
        Government Accountability Office, and others.
          (6) In July 2006, the leading international antimoney 
        laundering standard-setting body, the Financial Action Task 
        Force on Money Laundering (in this section referred to as the 
        ``FATF''), of which the United States is a member, issued a 
        report that criticizes the United States for failing to comply 
        with a FATF standard on the need to collect beneficial 
        ownership information and urged the United States to correct 
        this deficiency by July 2008. In December 2016, FATF issued 
        another evaluation of the United States, which found that 
        little progress has been made over the last ten years to 
        address this problem. It identified the ``lack of timely access 
        to adequate, accurate and current beneficial ownership 
        information'' as a fundamental gap in United States efforts to 
        combat money laundering and terrorist finance.
          (7) In response to the 2006 FATF report, the United States 
        has urged the States to obtain beneficial ownership information 
        for the corporations and limited liability companies formed 
        under the laws of such States.
          (8) In contrast to practices in the United States, all 28 
        countries in the European Union are required to have corporate 
        registries that include beneficial ownership information.
          (9) To reduce the vulnerability of the United States to 
        wrongdoing by United States corporations and limited liability 
        companies with hidden owners, to protect interstate and 
        international commerce from criminals misusing United States 
        corporations and limited liability companies, to strengthen law 
        enforcement investigations of suspect corporations and limited 
        liability companies, to set a clear, universal standard for 
        State incorporation practices, and to bring the United States 
        into compliance with international anti-money laundering 
        standards, Federal legislation is needed to require the 
        collection of beneficial ownership information for the 
        corporations and limited liability companies formed under the 
        laws of such States.

SEC. 3. TRANSPARENT INCORPORATION PRACTICES.

  (a) In General.--
          (1) Amendment to the bank secrecy act.--Chapter 53 of title 
        31, United States Code, is amended by inserting after section 
        5332 the following new section:

``Sec. 5333 Transparent incorporation practices

  ``(a) Reporting Requirements.--
          ``(1) Beneficial ownership reporting.--
                  ``(A) In general.--Each applicant to form a 
                corporation or limited liability company under the laws 
                of a State or Indian Tribe shall file a report with 
                FinCEN containing a list of the beneficial owners of 
                the corporation or limited liability company that--
                          ``(i) except as provided in paragraphs (3) 
                        and (4), and subject to paragraph (2), 
                        identifies each beneficial owner by--
                                  ``(I) full legal name;
                                  ``(II) date of birth;
                                  ``(III) current residential or 
                                business street address; and
                                  ``(IV) a unique identifying number 
                                from a non-expired passport issued by 
                                the United States, a non-expired 
                                personal identification card, or a non-
                                expired driver's license issued by a 
                                State; and
                          ``(ii) if the applicant is not a beneficial 
                        owner, also provides the identification 
                        information described in clause (i) relating to 
                        such applicant.
                  ``(B) Updated information.--Each corporation or 
                limited liability company formed under the laws of a 
                State or Indian Tribe shall--
                          ``(i) submit to FinCEN an annual filing 
                        containing a list of--
                                  ``(I) the current beneficial owners 
                                of the corporation or limited liability 
                                company and the information described 
                                in subparagraph (A) for each such 
                                beneficial owner; and
                                  ``(II) any changes in the beneficial 
                                owners of the corporation or limited 
                                liability company during the previous 
                                year; and
                          ``(ii) pursuant to any rule issued by the 
                        Secretary of the Treasury under subparagraph 
                        (C), update the list of the beneficial owners 
                        of the corporation or limited liability company 
                        within the time period prescribed by such rule.
                  ``(C) Rulemaking on updating information.--Not later 
                than 9 months after the completion of the study 
                required under section 4(a)(1) of the Corporate 
                Transparency Act of 2019, the Secretary of the Treasury 
                shall consider the findings of such study and, if the 
                Secretary determines it to be necessary or appropriate, 
                issue a rule requiring corporations and limited 
                liability companies to update the list of the 
                beneficial owners of the corporation or limited 
                liability company within a specified amount of time 
                after the date of any change in the list of beneficial 
                owners or the information required to be provided 
                relating to each beneficial owner.
                  ``(D) State notification.--Each State in which a 
                corporation or limited liability company is being 
                formed shall notify each applicant of the requirements 
                listed in subparagraphs (A) and (B).
          ``(2) Certain beneficial owners.--If an applicant to form a 
        corporation or limited liability company or a beneficial owner, 
        or similar agent of a corporation or limited liability company 
        who is required to provide identification information under 
        this subsection, does not have a nonexpired passport issued by 
        the United States, a nonexpired personal identification card, 
        or a non-expired driver's license issued by a State, each such 
        person shall provide to FinCEN the full legal name, current 
        residential or business street address, a unique identifying 
        number from a non-expired passport issued by a foreign 
        government, and a legible and credible copy of the pages of a 
        non-expired passport issued by the government of a foreign 
        country bearing a photograph, date of birth, and unique 
        identifying information for each beneficial owner, and each 
        application described in paragraph (1)(A) and each update 
        described in paragraph (1)(B) shall include a written 
        certification by a person residing in the State or Indian 
        country under the jurisdiction of the Indian Tribe forming the 
        entity that the applicant, corporation, or limited liability 
        company--
                  ``(A) has obtained for each such beneficial owner, a 
                current residential or business street address and a 
                legible and credible copy of the pages of a non-expired 
                passport issued by the government of a foreign country 
                bearing a photograph, date of birth, and unique 
                identifying information for the person;
                  ``(B) has verified the full legal name, address, and 
                identity of each such person;
                  ``(C) will provide the information described in 
                subparagraph (A) and the proof of verification 
                described in subparagraph (B) upon request of FinCEN; 
                and
                  ``(D) will retain the information and proof of 
                verification under this paragraph until the end of the 
                5-year period beginning on the date that the 
                corporation or limited liability company terminates 
                under the laws of the State or Indian Tribe.
          ``(3) Exempt entities.--
                  ``(A) In general.--With respect to an applicant to 
                form a corporation or limited liability company under 
                the laws of a State or Indian Tribe, if such entity is 
                described in subparagraph (C) or (D) of subsection 
                (d)(4) and will be exempt from the beneficial ownership 
                disclosure requirements under this subsection, such 
                applicant, or a prospective officer, director, or 
                similar agent of the applicant, shall file a written 
                certification with FinCEN--
                          ``(i) identifying the specific provision of 
                        subsection (d)(4) under which the entity 
                        proposed to be formed would be exempt from the 
                        beneficial ownership disclosure requirements 
                        under paragraphs (1) and (2);
                          ``(ii) stating that the entity proposed to be 
                        formed meets the requirements for an entity 
                        described under such provision of subsection 
                        (d)(4); and
                          ``(iii) providing identification information 
                        for the applicant or prospective officer, 
                        director, or similar agent making the 
                        certification in the same manner as provided 
                        under paragraph (1) or (2).
                  ``(B) Existing corporations or limited liability 
                companies.--On and after the date that is 2 years after 
                the final regulations are issued to carry out this 
                section, a corporation or limited liability company 
                formed under the laws of the State or Indian Tribe 
                before such date shall be subject to the requirements 
                of this subsection unless an officer, director, or 
                similar agent of the entity submits to FinCEN a written 
                certification--
                          ``(i) identifying the specific provision of 
                        subsection (d)(4) under which the entity is 
                        exempt from the requirements under paragraphs 
                        (1) and (2);
                          ``(ii) stating that the entity meets the 
                        requirements for an entity described under such 
                        provision of subsection (d)(4); and
                          ``(iii) providing identification information 
                        for the officer, director, or similar agent 
                        making the certification in the same manner as 
                        provided under paragraph (1) or (2).
                  ``(C) Exempt entities having ownership interest.--If 
                an entity described in subparagraph (C) or (D) of 
                subsection (d)(4) has or will have an ownership 
                interest in a corporation or limited liability company 
                formed or to be formed under the laws of a State or 
                Indian Tribe, the applicant, corporation, or limited 
                liability company in which the entity has or will have 
                the ownership interest shall provide the information 
                required under this subsection relating to the entity, 
                except that the entity shall not be required to provide 
                information regarding any natural person who has an 
                ownership interest in, exercises substantial control 
                over, or receives substantial economic benefits from 
                the entity.
          ``(4) FinCEN id numbers.--
                  ``(A) Issuance of fincen id number.--
                          ``(i) In general.--FinCEN shall issue a 
                        FinCEN ID number to any individual who requests 
                        such a number and provides FinCEN with the 
                        information described under subclauses (I) 
                        through (IV) of paragraph (1)(A)(i).
                          ``(ii) Updating of information.--An 
                        individual with a FinCEN ID number shall submit 
                        an annual filing with FinCEN updating any 
                        information described under subclauses (I) 
                        through (IV) of paragraph (1)(A)(i).
                  ``(B) Use of fincen id number in reporting 
                requirements.--Any person required to report the 
                information described under paragraph (1)(A)(i) with 
                respect to an individual may instead report the FinCEN 
                ID number of the individual.
                  ``(C) Treatment of information submitted for fincen 
                id number.--For purposes of this section, any 
                information submitted under subparagraph (A) shall be 
                deemed to be beneficial ownership information.
          ``(5) Retention and disclosure of beneficial ownership 
        information by fincen.--
                  ``(A) Retention of information.--Beneficial ownership 
                information relating to each corporation or limited 
                liability company formed under the laws of the State or 
                Indian Tribe shall be maintained by FinCEN until the 
                end of the 5-year period (or such other period of time 
                as the Secretary of the Treasury may, by rule, 
                determine) beginning on the date that the corporation 
                or limited liability company terminates.
                  ``(B) Disclosure of information.--Beneficial 
                ownership information reported to FinCEN pursuant to 
                this section shall be provided by FinCEN only upon 
                receipt of--
                          ``(i) subject to subparagraph (C), a request, 
                        through appropriate protocols, by a local, 
                        Tribal, State, or Federal law enforcement 
                        agency;
                          ``(ii) a request made by a Federal agency on 
                        behalf of a law enforcement agency of another 
                        country under an international treaty, 
                        agreement, or convention, or an order under 
                        section 3512 of title 18 or section 1782 of 
                        title 28; or
                          ``(iii) a request made by a financial 
                        institution, with customer consent, as part of 
                        the institution's compliance with due diligence 
                        requirements imposed under the Bank Secrecy 
                        Act, the USA PATRIOT Act, or other applicable 
                        Federal, State, or Tribal law.
                  ``(C) Appropriate protocols.--
                          ``(i) Privacy.--The protocols described in 
                        subparagraph (B)(i) shall--
                                  ``(I) protect the privacy of any 
                                beneficial ownership information 
                                provided by FinCEN to a local, Tribal, 
                                State, or Federal law enforcement 
                                agency;
                                  ``(II) ensure that a local, Tribal, 
                                State, or Federal law enforcement 
                                agency requesting beneficial ownership 
                                information has an existing 
                                investigatory basis for requesting such 
                                information;
                                  ``(III) ensure that access to 
                                beneficial ownership information is 
                                limited to authorized users at a local, 
                                Tribal, State, or Federal law 
                                enforcement agency who have undergone 
                                appropriate training, and that the 
                                identity of such authorized users is 
                                verified through appropriate 
                                mechanisms, such as two-factor 
                                authentication;
                                  ``(IV) include an audit trail of 
                                requests for beneficial ownership 
                                information by a local, Tribal, State, 
                                or Federal law enforcement agency, 
                                including, as necessary, information 
                                concerning queries made by authorized 
                                users at a local, Tribal, State, or 
                                Federal law enforcement agency;
                                  ``(V) require that every local, 
                                Tribal, State, or Federal law 
                                enforcement agency that receives 
                                beneficial ownership information from 
                                FinCEN conducts an annual audit to 
                                verify that the beneficial ownership 
                                information received from FinCEN has 
                                been accessed and used appropriately, 
                                and consistent with this paragraph; and
                                  ``(VI) require FinCEN to conduct an 
                                annual audit of every local, Tribal, 
                                State, or Federal law enforcement 
                                agency that has received beneficial 
                                ownership information to ensure that 
                                such agency has requested beneficial 
                                ownership information, and has used any 
                                beneficial ownership information 
                                received from FinCEN, appropriately, 
                                and consistent with this paragraph.
                          ``(ii) Limitation on use.--Beneficial 
                        ownership information provided to a local, 
                        Tribal, State, or Federal law enforcement 
                        agency under this paragraph may only be used 
                        for law enforcement, national security, or 
                        intelligence purposes.
  ``(b) No Bearer Share Corporations or Limited Liability Companies.--A 
corporation or limited liability company formed under the laws of a 
State or Indian Tribe may not issue a certificate in bearer form 
evidencing either a whole or fractional interest in the corporation or 
limited liability company.
  ``(c) Penalties.--
          ``(1) In general.--It shall be unlawful for any person to 
        affect interstate or foreign commerce by--
                  ``(A) knowingly providing, or attempting to provide, 
                false or fraudulent beneficial ownership information, 
                including a false or fraudulent identifying photograph, 
                to FinCEN in accordance with this section;
                  ``(B) willfully failing to provide complete or 
                updated beneficial ownership information to FinCEN in 
                accordance with this section; or
                  ``(C) knowingly disclosing the existence of a 
                subpoena or other request for beneficial ownership 
                information reported pursuant to this section, except--
                          ``(i) to the extent necessary to fulfill the 
                        authorized request; or
                          ``(ii) as authorized by the entity that 
                        issued the subpoena, or other request.
          ``(2) Civil and criminal penalties.--Any person who violates 
        paragraph (1)--
                  ``(A) shall be liable to the United States for a 
                civil penalty of not more than $10,000; and
                  ``(B) may be fined under title 18, United States 
                Code, imprisoned for not more than 3 years, or both.
          ``(3) Limitation.--Any person who negligently violates 
        paragraph (1) shall not be subject to civil or criminal 
        penalties under paragraph (2).
          ``(4) Waiver.--The Secretary of the Treasury may waive the 
        penalty for violating paragraph (1) if the Secretary determines 
        that the violation was due to reasonable cause and was not due 
        to willful neglect.
          ``(5) Criminal penalty for the misuse or unauthorized 
        disclosure of beneficial ownership information.--The criminal 
        penalties provided for under section 5322 shall apply to a 
        violation of this section to the same extent as such criminal 
        penalties apply to a violation described in section 5322, if 
        the violation of this section consists of the misuse or 
        unauthorized disclosure of beneficial ownership information.
  ``(d) Definitions.--For the purposes of this section:
          ``(1) Applicant.--The term `applicant' means any natural 
        person who files an application to form a corporation or 
        limited liability company under the laws of a State or Indian 
        Tribe.
          ``(2) Bank secrecy act.--The term `Bank Secrecy Act' means--
                  ``(A) section 21 of the Federal Deposit Insurance 
                Act;
                  ``(B) chapter 2 of title I of Public Law 91-508; and
                  ``(C) this subchapter.
          ``(3) Beneficial owner.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), the term `beneficial owner' means a natural person 
                who, directly or indirectly, through any contract, 
                arrangement, understanding, relationship, or 
                otherwise--
                          ``(i) exercises substantial control over a 
                        corporation or limited liability company;
                          ``(ii) owns 25 percent or more of the equity 
                        interests of a corporation or limited liability 
                        company; or
                          ``(iii) receives substantial economic 
                        benefits from the assets of a corporation or 
                        limited liability company.
                  ``(B) Exceptions.--The term `beneficial owner' shall 
                not include--
                          ``(i) a minor child, as defined in the State 
                        or Indian Tribe in which the entity is formed;
                          ``(ii) a person acting as a nominee, 
                        intermediary, custodian, or agent on behalf of 
                        another person;
                          ``(iii) a person acting solely as an employee 
                        of a corporation or limited liability company 
                        and whose control over or economic benefits 
                        from the corporation or limited liability 
                        company derives solely from the employment 
                        status of the person;
                          ``(iv) a person whose only interest in a 
                        corporation or limited liability company is 
                        through a right of inheritance; or
                          ``(v) a creditor of a corporation or limited 
                        liability company, unless the creditor also 
                        meets the requirements of subparagraph (A).
                  ``(C) Substantial economic benefits defined.--
                          ``(i) In general.--For purposes of 
                        subparagraph (A)(ii), a natural person receives 
                        substantial economic benefits from the assets 
                        of a corporation or limited liability company 
                        if the person has an entitlement to more than a 
                        specified percentage of the funds or assets of 
                        the corporation or limited liability company, 
                        which the Secretary of the Treasury shall, by 
                        rule, establish.
                          ``(ii) Rulemaking criteria.--In establishing 
                        the percentage under clause (i), the Secretary 
                        of the Treasury shall seek to--
                                  ``(I) provide clarity to corporations 
                                and limited liability companies with 
                                respect to the identification and 
                                disclosure of a natural person who 
                                receives substantial economic benefits 
                                from the assets of a corporation or 
                                limited liability company; and
                                  ``(II) identify those natural persons 
                                who, as a result of the substantial 
                                economic benefits they receive from the 
                                assets of a corporation or limited 
                                liability company, exercise a dominant 
                                influence over such corporation or 
                                limited liability company.
          ``(4) Corporation; limited liability company.--The terms 
        `corporation' and `limited liability company'--
                  ``(A) have the meanings given such terms under the 
                laws of the applicable State or Indian Tribe;
                  ``(B) include any non-United States entity eligible 
                for registration or registered to do business as a 
                corporation or limited liability company under the laws 
                of the applicable State or Indian Tribe;
                  ``(C) do not include any entity that is--
                          ``(i) a business concern that is an issuer of 
                        a class of securities registered under section 
                        12 of the Securities Exchange Act of 1934 (15 
                        U.S.C. 781) or that is required to file reports 
                        under section 15(d) of that Act (15 U.S.C. 
                        78o(d));
                          ``(ii) a business concern constituted, 
                        sponsored, or chartered by a State or Indian 
                        Tribe, a political subdivision of a State or 
                        Indian Tribe, under an interstate compact 
                        between two or more States, by a department or 
                        agency of the United States, or under the laws 
                        of the United States;
                          ``(iii) a depository institution (as defined 
                        in section 3 of the Federal Deposit Insurance 
                        Act (12 U.S.C. 1813));
                          ``(iv) a credit union (as defined in section 
                        101 of the Federal Credit Union Act (12 U.S.C. 
                        1752));
                          ``(v) a bank holding company (as defined in 
                        section 2 of the Bank Holding Company Act of 
                        1956 (12 U.S.C. 1841)) or a savings and loan 
                        holding company (as defined in section 10(a) of 
                        the Home Owners' Loan Act (12 U.S.C. 1467a(a));
                          ``(vi) a broker or dealer (as defined in 
                        section 3 of the Securities Exchange Act of 
                        1934 (15 U.S.C. 78c)) that is registered under 
                        section 15 of the Securities Exchange Act of 
                        1934 (15 U.S.C. 78o);
                          ``(vii) an exchange or clearing agency (as 
                        defined in section 3 of the Securities Exchange 
                        Act of 1934 (15 U.S.C. 78c)) that is registered 
                        under section 6 or 17A of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78f and 78q-1);
                          ``(viii) an investment company (as defined in 
                        section 3 of the Investment Company Act of 1940 
                        (15 U.S.C. 80a-3)) or an investment adviser (as 
                        defined in section 202(11) of the Investment 
                        Advisers Act of 1940 (15 U.S.C. 80b-2(11))), if 
                        the company or adviser is registered with the 
                        Securities and Exchange Commission, has filed 
                        an application for registration which has not 
                        been denied, under the Investment Company Act 
                        of 1940 (15 U.S.C. 80a-1 et seq.) or the 
                        Investment Adviser Act of 1940 (15 U.S.C. 80b-1 
                        et seq.), or is an investment adviser described 
                        under section 203(l) of the Investment Advisers 
                        Act of 1940 (15 U.S.C. 80b-3(l));
                          ``(ix) an insurance company (as defined in 
                        section 2 of the Investment Company Act of 1940 
                        (15 U.S.C. 80a-2));
                          ``(x) a registered entity (as defined in 
                        section 1a of the Commodity Exchange Act (7 
                        U.S.C. 1a)), or a futures commission merchant, 
                        introducing broker, commodity pool operator, or 
                        commodity trading advisor (as defined in 
                        section 1a of the Commodity Exchange Act (7 
                        U.S.C. 1a)) that is registered with the 
                        Commodity Futures Trading Commission;
                          ``(xi) a public accounting firm registered in 
                        accordance with section 102 of the Sarbanes-
                        Oxley Act (15 U.S.C. 7212) or an entity 
                        controlling, controlled by, or under common 
                        control of such a firm;
                          ``(xii) a public utility that provides 
                        telecommunications service, electrical power, 
                        natural gas, or water and sewer services, 
                        within the United States;
                          ``(xiii) a church, charity, nonprofit entity, 
                        or other organization that is described in 
                        section 501(c), 527, or 4947(a)(1) of the 
                        Internal Revenue Code of 1986, that has not 
                        been denied tax exempt status, and that has 
                        filed the most recently due annual information 
                        return with the Internal Revenue Service, if 
                        required to file such a return;
                          ``(xiv) a financial market utility designated 
                        by the Financial Stability Oversight Council 
                        under section 804 of the Dodd-Frank Wall Street 
                        Reform and Consumer Protection Act;
                          ``(xv) an insurance producer (as defined in 
                        section 334 of the Gramm-Leach-Bliley Act);
                          ``(xvi) any business concern that--
                                  ``(I) employs more than 20 employees 
                                on a full-time basis in the United 
                                States;
                                  ``(II) files income tax returns in 
                                the United States demonstrating more 
                                than $5,000,000 in gross receipts or 
                                sales; and
                                  ``(III) has an operating presence at 
                                a physical office within the United 
                                States; or
                          ``(xvii) any corporation or limited liability 
                        company formed and owned by an entity described 
                        in this clause or in clause (i), (ii), (iii), 
                        (iv), (v), (vi), (vii), (viii), (ix), (x), 
                        (xi), (xii), (xiii), (xiv), (xv), or (xvi); and
                  ``(D) do not include any individual business concern 
                or class of business concerns which the Secretary of 
                the Treasury and the Attorney General of the United 
                States have jointly determined, by rule of otherwise, 
                to be exempt from the requirements of subsection (a), 
                if the Secretary and the Attorney General jointly 
                determine that requiring beneficial ownership 
                information from the business concern would not serve 
                the public interest and would not assist law 
                enforcement efforts to detect, prevent, or prosecute 
                terrorism, money laundering, tax evasion, or other 
                misconduct.
          ``(5) Fincen.--The term `FinCEN' means the Financial Crimes 
        Enforcement Network of the Department of the Treasury.
          ``(6) Indian country.--The term `Indian country' has the 
        meaning given that term in section 1151 of title 18.
          ``(7) Indian tribe.--The term `Indian Tribe' has the meaning 
        given that term under section 102 of the Federally Recognized 
        Indian Tribe List Act of 1994.
          ``(8) Personal identification card.--The term `personal 
        identification card' means an identification document issued by 
        a State, Indian Tribe, or local government to an individual 
        solely for the purpose of identification of that individual.
          ``(9) State.--The term `State' means any State, commonwealth, 
        territory, or possession of the United States, the District of 
        Columbia, the Commonwealth of Puerto Rico, the Commonwealth of 
        the Northern Mariana Islands, American Samoa, Guam, or the 
        United States Virgin Islands.''.
          (2) Rulemaking.--
                  (A) In general.--Not later than 1 year after the date 
                of enactment of this Act, the Secretary of the Treasury 
                shall issue regulations to carry out this Act and the 
                amendments made by this Act, including, to the extent 
                necessary, to clarify the definitions in section 
                5333(d) of title 31, United States Code.
                  (B) Revision of final rule.--Not later than 1 year 
                after the date of enactment of this Act, the Secretary 
                of the Treasury shall revise the final rule titled 
                ``Customer Due Diligence Requirements for Financial 
                Institutions'' (May 11, 2016; 81 Fed. Reg. 29397) to--
                          (i) bring the rule into conformance with this 
                        Act and the amendments made by this Act;
                          (ii) account for financial institutions' 
                        access to comprehensive beneficial ownership 
                        information filed by corporations and limited 
                        liability companies, under threat of civil and 
                        criminal penalties, under this Act and the 
                        amendments made by this Act; and
                          (iii) reduce any burdens on financial 
                        institutions that are, in light of the 
                        enactment of this Act and the amendments made 
                        by this Act, unnecessary or duplicative.
          (3) Conforming amendments.--Title 31, United States Code, is 
        amended--
                  (A) in section 5321(a)--
                          (i) in paragraph (1), by striking ``sections 
                        5314 and 5315'' each place it appears and 
                        inserting ``sections 5314, 5315, and 5333''; 
                        and
                          (ii) in paragraph (6), by inserting ``(except 
                        section 5333)'' after ``subchapter'' each place 
                        it appears; and
                  (B) in section 5322, by striking ``section 5315 or 
                5324'' each place it appears and inserting ``section 
                5315, 5324, or 5333''.
          (4) Table of contents.--The table of contents of chapter 53 
        of title 31, United States Code, is amended by inserting after 
        the item relating to section 5332 the following:

``5333. Transparent incorporation practices.''.

  (b) Funding Authorization.--
          (1) In general.--To carry out section 5333 of title 31, 
        United States Code, as added by subsection (a), funds shall be 
        made available to the Financial Crimes Enforcement Network (in 
        this subsection referred to as ``FinCEN'') to pay reasonable 
        costs relating to compliance with the requirements of such 
        section.
          (2) Funding sources.--Funds shall be provided to FinCEN to 
        carry out the purposes described in paragraph (1) from one or 
        more of the following sources:
                  (A) Upon application by FinCEN, and without further 
                appropriation, the Secretary of the Treasury shall make 
                available to the FinCEN unobligated balances described 
                in section 9703(g)(4)(B) of title 31, United States 
                Code, in the Department of the Treasury Forfeiture Fund 
                established under section 9703(a) of title 31, United 
                States Code.
                  (B) Upon application by FinCEN, after consultation 
                with the Secretary of the Treasury, and without further 
                appropriation, the Attorney General of the United 
                States shall make available to FinCEN excess 
                unobligated balances (as defined in section 
                524(c)(8)(D) of title 28, United States Code) in the 
                Department of Justice Assets Forfeiture Fund 
                established under section 524(c) of title 28, United 
                States Code.
          (3) Maximum amounts.--
                  (A) Department of the treasury.--The Secretary of the 
                Treasury may not make available to FinCEN a total of 
                more than $30,000,000 under paragraph (2)(A).
                  (B) Department of justice.--The Attorney General of 
                the United States may not make available to FinCEN a 
                total of more than $10,000,000 under paragraph (2)(B).
  (c) Federal Contractors.--Not later than the first day of the first 
full fiscal year beginning at least 1 year after the date of the 
enactment of this Act, the Administrator for Federal Procurement Policy 
shall revise the Federal Acquisition Regulation maintained under 
section 1303(a)(1) of title 41, United States Code, to require any 
contractor or subcontractor who is subject to the requirement to 
disclose beneficial ownership information under section 5333 of title 
31, United States Code, to provide the information required to be 
disclosed under such section to the Federal Government as part of any 
bid or proposal for a contract with a value threshold in excess of the 
simplified acquisition threshold under section 134 of title 41, United 
States Code.

SEC. 4. STUDIES AND REPORTS.

  (a) Updating of Beneficial Ownership Information.--
          (1) Study.--The Secretary of the Treasury, in consultation 
        with the Attorney General of the United States, shall conduct a 
        study to evaluate--
                  (A) the necessity of a requirement for corporations 
                and limited liability companies to update the list of 
                their beneficial owners within a specified amount of 
                time after the date of any change in the list of 
                beneficial owners or the information required to be 
                provided relating to each beneficial owner, taking into 
                account the annual filings required under section 
                5333(a)(1)(B)(i) of title 31, United States Code, and 
                the information contained in such annual filings; and
                  (B) the burden that a requirement to update the list 
                of beneficial owners within a specified period of time 
                after a change in such list of beneficial owners would 
                impose on corporations and limited liability companies.
          (2) Report.--Not later than 1 year after the date of 
        enactment of this Act, the Secretary of the Treasury shall 
        submit a report on the study required under paragraph (1) to 
        the Committee on Financial Services of the House of 
        Representatives and the Committee on Banking, Housing, and 
        Urban Affairs of the Senate
          (3) Public comment.--The Secretary of the Treasury shall seek 
        and consider public input, comments, and data in order to 
        conduct the study required under subparagraph paragraph (1).
  (b) Other Legal Entities.--Not later than 2 years after the date of 
enactment of this Act, the Comptroller General of the United States 
shall conduct a study and submit to the Congress a report--
          (1) identifying each State or Indian Tribe that has 
        procedures that enable persons to form or register under the 
        laws of the State or Indian Tribe partnerships, trusts, or 
        other legal entities, and the nature of those procedures;
          (2) identifying each State or Indian Tribe that requires 
        persons seeking to form or register partnerships, trusts, or 
        other legal entities under the laws of the State or Indian 
        Tribe to provide information about the beneficial owners (as 
        that term is defined in section 5333(d)(1) of title 31, United 
        States Code, as added by this Act) or beneficiaries of such 
        entities, and the nature of the required information;
          (3) evaluating whether the lack of available beneficial 
        ownership information for partnerships, trusts, or other legal 
        entities--
                  (A) raises concerns about the involvement of such 
                entities in terrorism, money laundering, tax evasion, 
                securities fraud, or other misconduct;
                  (B) has impeded investigations into entities 
                suspected of such misconduct; and
                  (C) increases the costs to financial institutions of 
                complying with due diligence requirements imposed under 
                the Bank Secrecy Act, the USA PATRIOT Act, or other 
                applicable Federal, State, or Tribal law; and
          (4) evaluating whether the failure of the United States to 
        require beneficial ownership information for partnerships and 
        trusts formed or registered in the United States has elicited 
        international criticism and what steps, if any, the United 
        States has taken or is planning to take in response.
  (c) Effectiveness of Incorporation Practices.--Not later than 5 years 
after the date of enactment of this Act, the Comptroller General of the 
United States shall conduct a study and submit to the Congress a report 
assessing the effectiveness of incorporation practices implemented 
under this Act and the amendments made by this Act in--
          (1) providing law enforcement agencies with prompt access to 
        reliable, useful, and complete beneficial ownership 
        information; and
          (2) strengthening the capability of law enforcement agencies 
        to combat incorporation abuses, civil and criminal misconduct, 
        and detect, prevent, or punish terrorism, money laundering, tax 
        evasion, or other misconduct.

SEC. 5. DEFINITIONS.

  In this Act, the terms ``Bank Secrecy Act'', ``beneficial owner'', 
``corporation'', and ``limited liability company'' have the meaning 
given those terms, respectively, under section 5333(d) of title 31, 
United States Code.

                          Purpose and Summary

    On May 3, 2019, Representative Carolyn Maloney introduced 
H.R. 2513, the ``Corporate Transparency Act of 2019,'' which 
would require corporations and limited liability corporations 
(LLCs) to disclose their true ``beneficial owners'' to the 
Financial Crime Enforcement Network (FinCEN) at the time a 
company is formed and in annual filings. Companies would also 
disclose beneficial ownership and changes in beneficial owners 
in annual filings.
    The FinCEN database of beneficial ownership information 
would be available to law enforcement agencies and, with 
customer consent, to financial institutions for purposes of 
complying with their ``Know-Your-Customer'' regulatory 
requirements, along with appropriate privacy protections. The 
Corporate Transparency Act further establishes criminal 
penalties for the misuse or unauthorized disclosure of the 
beneficial ownership information. Criminal penalties may also 
be imposed on persons who knowingly provide false or fraudulent 
beneficial information or who willfully fail to complete or 
update the required filings. The Corporate Transparency Act, 
however, is explicit in providing an exception that declares 
that negligent violations will not be subject to civil or 
criminal penalties. Penalties may also be waived where the 
Secretary of the Treasury determines that a violation was based 
on reasonable cause.
    The Corporate Transparency Act exempts entities already 
required by Federal or state law to disclose their beneficial 
owners, such as SEC-regulated public companies, state-regulated 
insurance companies, and charitable organizations. It also 
requires FinCEN to act within a year to remove redundancies 
with its Customer Due Diligence rule.

                  Background and Need for Legislation

    No state of the United States currently requires companies, 
including anonymous shell companies, to disclose their 
beneficial owners. Anonymous shell companies are business 
entities formed to hold funds or conduct financial transactions 
but generally do not have a physical address, employees, 
business operations, or real assets. They afford a high level 
of secrecy, enabling criminals, terrorists, and money 
launderers to make use of them to hide their illicit proceeds 
and facilitate illegal activities. This lack of transparency is 
considered by law enforcement, financial institutions, and 
anti-corruption organizations to be a primary obstacle to 
tackling financial crime in the modern era. The Corporate 
Transparency Act would address this omnipresent hindrance by 
requiring a company's beneficial owners to be disclosed to 
FinCEN at the time the company is formed and in annual filings.
    Furthermore, the United States does not meet international 
standards with regards to disclosure of beneficial ownership. 
The Financial Action Task Force (FATF), the international 
standard-setting body for anti-money laundering/combatting the 
financing of terrorism (AML/CFT), conducted a peer review on 
the United States AML/CFT regime in December 2016 and 
determined that ``lack of timely access to adequate, accurate 
and current beneficial ownership (BO) information remains one 
of the fundamental gaps in the U.S. context.''\1\ Several other 
developed countries have met international standards of 
collecting beneficial ownership information. The European Union 
(E.U.), for example, enacted the E.U. Fourth Anti-Money 
Laundering Directive in 2015, requiring all members states to 
collect and share beneficial ownership information. The United 
Kingdom has also established a publicly searchable database and 
commensurate laws to fulfill this purpose. Accordingly, 
requiring the disclosure of a company's beneficial owners would 
bring the United States in compliance with FATF recommendations 
and in line with partner nations.
---------------------------------------------------------------------------
    \1\FATF (2016), Anti-money laundering and counter-terrorist 
financing measures--United States, Fourth Round Mutual Evaluation 
Report, FATF, Paris, p. 4 www.fatf-gafi.org/publications/
mutualevaluations/documents/mer-united-states-2016.html.
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    Bringing the United States in line with these standards, 
the Corporate Transparency Act's disclosure requirements will 
define beneficial owners as including all natural persons who 
exercise substantial control over a company, own 25% or more of 
the equity interests of a company, or receive substantial 
economic benefits from the assets of a company. To ensure that 
privacy is protected, the Corporate Transparency Act requires 
FinCEN to establish protocols and oversee the access and 
appropriate use of the beneficial ownership information by 
eligible law enforcement agencies. FinCEN and every recipient 
law enforcement agency must also audit this access and 
appropriate use on an annual basis to ensure adherence to these 
standards. The agency must also give filers the option to 
obtain a masked, FinCEN-generated customer identification 
number for use in the fulfillment of related reporting 
requirements.
    On March 13, 2019, the Subcommittee on National Security, 
International Development, and Monetary Policy held a hearing 
during which the legislation was considered. Dennis Lormel, a 
former special agent at the Federal Bureau of Investigation 
(FBI) and former Director of the FBI's Terrorist Financing 
Operation Section, spoke in support of the bill stating ``I 
want to strongly encourage the committee to pass this 
legislation, beneficial ownership legislation. I have been 
advocating for this since 2012, and I think it's really 
important.'' Lormel also stated that he believes the collection 
of beneficial ownership information would help law enforcement 
pursue criminal drug traffickers.
    In a May 6, 2019 letter, the National District Attorneys 
Association (NDAA), the largest prosecutor organization 
representing 2,500 elected and appointed District Attorneys and 
40,000 Assistant District Attorneys across the United States, 
wrote, ``[f]ollowing hearings in the Senate and House on this 
issue, NDAA has chosen to support the Corporate Transparency 
Act. The need for the collection of beneficial ownership 
information is critical to law enforcement investigations into 
organized transnational criminal operations, terrorism 
financing and other unlawful activity.''\2\ In a separate May 
6, 2019 letter, the Fraternal Order of Police (FOP) wrote, ``I 
am writing on behalf of the members of the Fraternal Order of 
Police to advise you of our strong support for HR. 2513, the 
`Corporation Transparency Act.' The FOP has supported this 
legislation for many years and we are grateful that the 
committee will be considering it this week. Transnational 
criminal organizations and terrorist operations are using our 
banks, financial institutions and other means to profit from 
their illegal activity. This is a well-documented problem for 
our financial institutions and for law enforcement as we work 
together to shut down these sophisticated criminal 
enterprises.''\3\
---------------------------------------------------------------------------
    \2\Letter to the Honorable Carolyn B. Maloney, National District 
Attorneys Association (May 6, 2019), https://thefactcoalition.org/wp-
content/uploads/2019/05/NDAA-Ben-Ownership-Letter-5-6-19-Maloney.pdf.
    \3\Letter to Chairwoman Waters and Ranking Member McHenry, 
Fraternal Order of Police (May 6, 2019) https://thefactcoalition.org/
wp-content/uploads/2019/05/FOP-Support-HR-2513-Corpoarte-
Transparency.pdf.
---------------------------------------------------------------------------
    In addition, the Corporate Transparency Act, and the 
collection of beneficial ownership information, is supported by 
a wide range of stakeholders in addition to those referenced 
above, including law enforcement associations, transparency 
advocates, national security experts, anti-human trafficking 
organizations, human rights groups, international development 
organizations, financial services industry representatives, and 
real estate associations. Some of these supporters of the 
legislation or collection of beneficial ownership information 
include the National Sheriff's Association, the National 
Association of Assistant U.S. Attorneys (NAAUSA), a bipartisan 
group of 91 national security experts,\4\ Jubilee USA, Street 
Grace, Polaris, human rights groups (including Amnesty 
International USA, Human Rights Watch, Human Rights First, 
Freedom House), international development organizations 
(including ONE Campaign, Oxfam, ActionAid, Bread for the 
World), Bank Policy Institute, Consumer Bankers Association, 
Securities Industry and Financial Markets Association, Mid-Size 
Bank Coalition of America, Institute of International Bankers, 
American Bankers Association, Financial Services Forum, Bankers 
Association for Finance and Trade, Institute of International 
Finance, Independent Community Bankers of America (ICBA), 
National Association of Federally-Insured Credit Unions 
(NAFCU), American Escrow Association, American Land Title 
Association, National Association of REALTORS, Real Estate 
Services Providers Council, Inc. (RESPRO).
---------------------------------------------------------------------------
    \4\Letter to Chairwoman Waters and Ranking Member McHenry, 
Bipartisan Group of 91 National Security Experts Urge Lawmakers to End 
Anonymous Companies (June 10, 2019), https://thefactcoalition.org/wp-
content/uploads/2019/06/HFSC-Letter-on-Anonymous-Companies-and-
National-Security-20190610.pdf.
---------------------------------------------------------------------------

                      Section-by-Section Analysis


Section 1. Short title

    This section provides that the short title of the bill is 
the ``Corporate Transparency Act of 2019''.

Section 2. Findings

    This section states various findings that demonstrate the 
need for the bill. These provide in part that--
    1. Nearly 2,000,000 corporations and limited liability 
companies are formed under the laws of the several States each 
year;
    2. Very few states require information about the beneficial 
owners of such corporations and companies.
    3. A person forming such corporations of companies 
typically provides less information at the time of 
incorporation than needed to obtain a bank account or driver's 
license.
    4. Criminals have concealed their identities and used such 
entities to commit crimes affecting interstate and 
international commerce such as terrorism, proliferation 
financing, drug and human trafficking, money laundering, and 
security and financial fraud.
    5. Law enforcement efforts to investigate such entities are 
impeded by a lack of available beneficial ownership 
information.
    6. The Financial Action Task Force on Money Laundering 
criticized the United States for failing to collect beneficial 
ownership information, and the United States itself has urged 
individual states to obtain beneficial ownership information.
    7. This gap is in contrast to the requirements of all 28 
countries in the European Union to have corporate registries 
that include beneficial ownership.
    8. Because of these factors, Federal legislation is needed 
to require the collection of beneficial ownership information 
for such entities.

Section 3. Transparent incorporation practices

    Paragraph (1) of subsection (a) amends the Bank Secrecy Act 
(BSA) by adding a new section 5333 to chapter 53, title 31 of 
the U.S. Code.
            Beneficial ownership reporting requirements
    Subsection (a)(1) of the new section 5333 requires 
applicants seeking to form a corporation or a limited liability 
company (LLC) (hereinafter, a ``company'') to file a list of 
its beneficial owners with the Financial Crimes Enforcement 
Network (FinCEN) at the time the company is formed. The list of 
beneficial owners filed with FinCEN must include the same 
information that financial institutions are required to collect 
under FinCEN's Customer Due Diligence (CDD) rule: the full 
legal name, date of birth, current residential or business 
address, and a current identifying number, such as a driver's 
license or passport number, for each beneficial owner. 
Applicants are also required to provide the aforementioned 
identification information even if they are not themselves 
beneficial owners.
    Subsection (a)(1) also requires companies to file annually 
with FinCEN a list of its current beneficial owners, as well as 
a list of any changes in beneficial ownership that occurred 
during the previous year. In addition, the Treasury Secretary 
is authorized to require companies to file more frequent 
updates with FinCEN if the Secretary issues a rule requiring 
updates within a specified amount of time after a change in a 
company's beneficial ownership. Prior to issuing this rule, the 
Secretary, in consultation with the Attorney General, must 
conduct a study of the necessity of requiring companies to file 
updates with FinCEN in between the required annual filings.
    Finally, subsection (a)(1) requires states to notify each 
applicant seeking to form a company in the state of its 
obligation to file a list of its beneficial owners with FinCEN.
            Identification of certain beneficial owners
    Subsection (a)(2) of the new section 5333 requires that, if 
a beneficial owner of a company does not have a current U.S. 
identifying number, such as a driver's license or U.S. passport 
number, applicants seeking to form the company must file with 
FinCEN each foreign beneficial owner's full legal name, current 
residential or business address, and a current foreign passport 
number, along with a copy of the foreign passport.
    In each filing with FinCEN, applicants for a company with a 
foreign beneficial owner must certify that they have obtained 
all the necessary information for each foreign beneficial 
owner, have verified the name, address, and identity of each 
foreign beneficial owner, will provide this information to 
FinCEN upon request, and will retain the information for 5 
years after the company terminates.
            Exempt entities
    Subsection (a)(3) of the new section 5333 requires 
applicants seeking to form an entity that is exempt from filing 
beneficial ownership information with FinCEN (see section 
5333(d)(4)(C) for a list of exempt entities) to file a written 
certification with FinCEN identifying the specific applicable 
exemption and provide the identifying information (as described 
in Section 5333(a)(1)) of the applicant.
    Existing entities that qualify for an exemption have 2 
years from the date that the final regulations are issued by 
Treasury to carry out this Act to file the required 
certification with FinCEN stating that it is exempt.
    For existing exempt entities that have an ownership 
interest in a non-exempt company, only the non-exempt company 
is required to file beneficial ownership information with 
FinCEN.
            FinCEN ID numbers, retention, and disclosure of information
    Subsection (a)(4) of the new section 5333 requires FinCEN 
to issue a FinCEN ID number to any individuals who requests one 
and provide identifying information (as described in the new 
section 5333(a)(1)). Individuals with a FinCEN ID number are 
required to submit an annual filing with FinCEN updating their 
identifying information. Any person required to report 
identifying information as described in the new section 
5333(a)(1) may report the FinCEN ID number of the individual in 
the place of the individual's identifying information. The 
information submitted for a FinCEN ID number shall be deemed to 
be beneficial ownership information.
    Subsection (a)(5)(A) of the new section 5333 requires 
FinCEN to retain the beneficial ownership information filed 
with it for 5 years after the company terminates. Treasury is 
authorized to shorten the 5-year retention period by rule.
    Subsection (a)(5)(B) provides that FinCEN may only provide 
beneficial ownership information to:
    1. Federal, state, local, or Tribal law enforcement 
agencies, and only pursuant to a request through appropriate 
protocols;
    2. A Federal agency making a request on behalf of a foreign 
law enforcement agency pursuant to an international treaty, 
agreement, convention, or order; and
    3. Financial institutions, with customer consent, for 
purposes of complying with FinCEN's CDD rule.
            Privacy safeguards
    Subsection (a)(5)(C) includes robust privacy safeguards for 
FinCEN's database of beneficial ownership information--to which 
law enforcement agencies will have access under subparagraph 
(B)--which are modeled after FinCEN's privacy safeguards for 
its Suspicious Activity Report database (known as FinCEN 
Query).
    Specifically, subsection (a)(5)(C) requires that the 
protocols through which law enforcement agencies can access 
FinCEN's beneficial ownership information must:
    1. Protect the privacy of any beneficial ownership 
information;
    2. Ensure that any law enforcement agency requesting 
beneficial ownership information from FinCEN have an existing 
investigatory basis for its request;
    3. Ensure that only authorized users at law enforcement 
agencies (who have undergone appropriate training) have access 
to the database and that their authorized user status is 
verified through appropriate mechanisms such as two-factor 
authentication;
    4. Include an audit trail of every law enforcement agency's 
requests for beneficial ownership information; and
    5. Require annual audits by FinCEN and by each law 
enforcement agency that has access to the beneficial ownership 
database, to ensure that those agencies are using the 
beneficial ownership information appropriately. These audits 
are intended to be similar to the annual inspections that 
FinCEN currently conducts of law enforcement agencies that have 
access to BSA data through the FinCEN Portal/FinCEN Query 
system.
    Further, subsection (a)(5)(C) prohibits any beneficial 
ownership information provided to law enforcement agencies by 
FinCEN from being used for inappropriate reasons, by stating 
that such beneficial ownership information may only be used for 
law enforcement, national security, or intelligence purposes.
            Enforcement measures
    Subsection (b) of the new section 5333 prohibits certain 
companies from issuing bearer shares.
    Subsection (c) of the new section 5333 provides that it is 
unlawful for anyone to:
    1. Knowingly\5\ file false beneficial ownership information 
to FinCEN;
---------------------------------------------------------------------------
    \5\ Black's Law Dictionary defines ``knowingly'' as: ``In such a 
manner that the actor engaged in prohibited conduct with the knowledge 
that the social harm that the law was designed to prevent was 
practically certain to result; deliberately.'' See Black's Law 
Dictionary (10th ed. 2014).
---------------------------------------------------------------------------
    2. Willfully\6\ fail to provide complete or updated 
beneficial ownership information to FinCEN; or
---------------------------------------------------------------------------
    \6\Black's Law Dictionary defines ``willful'' as: ``Voluntary and 
intentional, but not necessarily malicious.'' Id.
---------------------------------------------------------------------------
    3. Knowingly disclose the existence of a subpoena or other 
request for beneficial ownership information (except to the 
extent necessary to fulfill the authorized request for 
beneficial ownership information, or if the agency issuing the 
subpoena or request authorized the disclosure).
    Importantly, Subsection (c) also explicitly states that 
negligent violations are not penalized.
    Violations of this subsection are subject to a civil 
penalty of not more than $10,000, or criminal penalties under 
title 18 of the U.S. Code, which can include fines and 
imprisonment for not more than 3 years.
    Subsection (c) also creates a waiver process for violations 
that are due to reasonable cause and not due to willful 
neglect, which is modeled on the Internal Revenue Service (IRS) 
waiver process for companies' SS-4 filings.
    Finally, subsection (c) provides strict penalties for 
misuse or unauthorized disclosure by government employees of 
beneficial ownership information collected by FinCEN. These 
penalties, which are identical to the penalties for 
unauthorized disclosure of Suspicious Activity Reports (SARs), 
include criminal penalties of up to $250,000 and imprisonment 
for not more than 5 years.
            Definitions
    Subsection (d) of the new section 5333 defines key terms in 
the bill, the most important of which are listed below.
    Paragraph (1) provides that the term ``applicant'' means 
any natural person who files an application to form a company 
under state or tribal law.
    Paragraph (3) provides that the term ``beneficial owner'' 
means a natural person who, directly or indirectly, through any 
contract, arrangement, understanding, relationship, or 
otherwise:
          1. Exercises substantial control over a company;
          2. Owns 25% or more of the equity interests of a 
        company; or
          3. Receives substantial economic benefits from the 
        assets of a company.
    Paragraph (3) also provides that a person receives 
``substantial economic benefits'' from a company if the person 
has an entitlement to more than a specified percentage of the 
funds or assets of the company, which Treasury is required to 
establish by promulgating a rule.
    Paragraph (3) also provides that a ``beneficial owner'' 
does not include: a minor child; a person acting as an agent, 
nominee, intermediary, or custodian on behalf of another 
person; a person acting solely as an employee of the company; a 
person with mere inheritance rights in a company; or a mere 
creditor of a company.
    Paragraph (4) provides that the ``terms ``corporation'' and 
``limited liability company'' have the meanings given to those 
terms under the applicable state laws.
    Paragraph (4) also provides that the following entities are 
exempt from the definitions of ``corporation'' and ``limited 
liability company'':
          1. Public companies under the Securities Exchange Act 
        of 1934;
          2. Federally chartered entities, and entities 
        sponsored or chartered under an interstate compact 
        between two or more states;
          3. Depository institutions;
          4. Credit unions;
          5. Bank holding companies and savings and loan 
        holding companies;
          6. SEC-registered broker-dealers, exchanges, clearing 
        agencies, investment advisers, investment companies, 
        and exempt reporting advisers;
          7. State-regulated insurance companies and insurance 
        agents and brokers;
          8. CFTC-registered futures commission merchants 
        (FCMs), introducing brokers, commodity pool operators, 
        and commodity trading advisors (CTAs);
          9. PCAOB-registered public accounting firms;
          10. Public utilities;
          11. Churches, charities, nonprofit entities, and any 
        other entity that qualifies for tax-exempt status under 
        sections 501(a), 527, or 4947(a)(1) of the Internal 
        Revenue Code;
          12. Systemically important financial market utilities 
        (SIFMUs);
          13. Any company in the U.S. that has more than:
          a. 20 employees in the U.S.; and
          b. $5 million in annual gross receipts or sales;
          14. Any company formed and owned by an exempt entity; 
        and
          15. Any company or class of companies that the 
        Treasury Secretary and the Attorney General jointly 
        determine should be exempt from the beneficial 
        ownership reporting requirements in this bill.
            Rulemaking, funding, and requirements on Federal 
                    contractors
    Subsection (a)(2) of section 3 authorizes Treasury to issue 
regulations to carry out this Act.
    Subsection (a)(2) also requires Treasury, within one year, 
to revise the Customer Due Diligence rule, in order to: bring 
the rule into conformance with this Act; account for the fact 
that financial institutions have access to comprehensive, high-
quality beneficial ownership information under this Act; and 
reduce any burdens on financial institutions that are, because 
of the new beneficial ownership reporting system established by 
this Act, now unnecessary or duplicative.
    Subsection (b) of section 3 authorizes $30 million in 
funding from the Treasury Forfeiture Fund, and $10 million in 
funding from the Department of Justice Asset Forfeiture Fund, 
to carry out this Act.
    Subsection (c) of Section 3 requires the Administrator for 
Federal Procurement Policy to require any contractor or 
subcontractor that is required to file beneficial ownership 
information under this Act to also file the same beneficial 
ownership information with the Federal Government as part of 
its bid or proposal for a contract.

Section 4. Studies and reports

    This section requires three studies:
    Subsection (a) requires the Treasury Secretary, in 
consultation with the Attorney General to study the necessity 
and burden of requiring companies to file updates with FinCEN 
when a change in beneficial ownership occurs in between the 
required annual filings. Within one year of enactment, the 
Treasury Secretary shall submit a report to Congress on the 
findings of the study.
    Subsection (b) requires the General Accounting Office 
(GAO), within 2 years of the enactment of this Act, to study 
whether the lack of beneficial ownership information for 
partnerships, trusts, or other legal entities raises concerns 
about the involvement of those entities in money laundering and 
other misconduct.
    Subsection (c) requires the GAO, within 5 years of 
enactment of this Act, to study how effective the beneficial 
ownership reporting requirements in this Act have been in 
providing law enforcement with timely access to reliable and 
useful beneficial ownership information, and whether such 
access has helped law enforcement agencies combat money 
laundering and other misconduct.

Section 5. Definitions

    This section clarifies that the definitions of ``beneficial 
owner,'' ``corporation,'' and ``limited liability company'' in 
this Act have the same meaning as in the new 31 U.S.C. 
Sec. 5333(d) added by this Act.

                                Hearings

    For the purposes of section 103(i) of H. Res. 6 for the 
116th Congress--
    1. The Committee on Financial Services held a hearing to 
consider a discussion draft of H.R. 2513 entitled `Promoting 
Corporate Transparency: Examining Legislative Proposals to 
Detect and Deter Financial Crime' on March 13, 2019. Testifying 
on the panel was: Mr. Jacob Cohen, former Director, Office of 
Stakeholder Engagement, FinCEN; Mr. Dennis M. Lormel, President 
and Chief Executive Officer, DML Associates, LLC; Mr. Amit 
Sharma, Chief Executive Officer, FinClusive; and Dr. Gary 
Shiffman, Founder and Chief Executive Officer, Giant Oak, Inc.
    2. In addition, in the 115th Congress, the Committee held a 
related joint hearing with the Subcommittee on Terrorism and 
Illicit Finance to consider H.R. 2219, the ``Counter Terrorism 
and Illicit Finance Act'' entitled, `Legislative Proposals to 
Counter Terrorism and Illicit Finance' on November 29, 2017. 
Testifying on the panel was: Mr. Daniel H. Bley, Executive Vice 
President and Chief Risk Officer, Webster Bank, on behalf of 
the Mid-Size Bank Coalition of America; Mr. John J. Byrne, 
President, Condor Consulting LLC' Mr. William J. Fox, Managing 
Director, Global Head of Financial Crimes Compliance, Bank of 
America, on behalf of The Clearing House; Ms. Stefanie Ostfeld, 
Deputy Head of US Office, Global Witness; and Mr. Chip Poncy, 
President and Co-Founder, Financial Integrity Network.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
June 12, 2019, and ordered H.R. 2513 to be reported favorably 
to the House with an amendment in the nature of a substitute by 
a vote of 43 yeas and 16 nays, a quorum being present.

                  Committee Votes and Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following roll call votes occurred during the Committee's 
consideration of H.R. 2513.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

             Statement of Performance Goals and Objectives

    Pursuant to clause (3)(c) of rule XIII of the Rules of the 
House of Representatives, the goals of H.R. 2513 are to require 
corporations and limited liability corporations to disclose 
their true ``beneficial owners'' to the Financial Crime 
Enforcement Network at the time a company is formed and in 
annual filings.

               New Budget Authority and CBO Cost Estimate

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974, and pursuant to clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following estimate for 
H.R. 2513 from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 12, 2019.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2513, the 
Corporate Transparency Act of 2019.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark 
Grabowicz.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    The bill would
           Require certain companies to provide 
        information annually to the Financial Crimes 
        Enforcement Network (FinCEN)
           Require FinCEN to inspect certain law 
        enforcement agencies
           Establish civil and criminal fines for 
        violations of the bill's provisions
           Require states to notify some applicants for 
        corporation and limited liability corporation (LLC) 
        status of new requirements to identify beneficial 
        owners of the corporation
           Prohibit some newly formed corporations and 
        LLCs from issuing bearer shares (equity securities 
        wholly owned by the holder of the physical stock 
        certificate)
           Require corporations and LLCs to provide 
        beneficial ownership information annually to FinCen
    Estimated budgetary effects would primarily stem from
           Costs to FinCEN to hire additional employees 
        to carry out the bill's provisions
    Areas of significant uncertainty include
           The number of new annual filings with FinCEN 
        that would result from enactment of the bill
    Bill summary: H.R. 2513 would require certain corporations 
and limited liability companies, or applicants to form such 
entities, to provide information to the Financial Crimes 
Enforcement Network annually. Violators of the bill's 
provisions would be subject to civil and criminal penalties.
    Estimated federal cost: The estimated budgetary effect of 
H.R. 2513 is shown in Table 1. The costs of the legislation 
fall within budget function 750 (administration of justice).

              TABLE 1.--ESTIMATED INCREASES IN SPENDING SUBJECT TO APPROPRIATION UNDER H.R. 2513\a\
----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, millions of dollars--
                                                       ---------------------------------------------------------
                                                                                                          2019-
                                                         2019    2020    2021    2022    2023    2024     2024
----------------------------------------------------------------------------------------------------------------
Estimated Authorization...............................       0      26      27      27      28      28       136
                   Estimated Outlays                         0      23      26      27      28      28       132
----------------------------------------------------------------------------------------------------------------
\a\In addition to the amounts above, CBO estimates that enacting H.R. 2513 would have insignificant effects on
  revenues and direct spending in each year and over the five and ten-year periods.

    Basis of estimate: CBO assumes that the legislation will be 
enacted near the end of 2019 and that the necessary amounts 
will be provided each year. Estimated outlays are based on 
historical spending patterns for similar activities.
    Direct spending: H.R. 2513 would make the funds available 
to FinCEN for the agency to implement the bill's provisions, as 
follows:
           Up to $30 million of unobligated balances 
        from the Treasury Forfeiture Fund, and;
           Up to $10 million of unobligated balances 
        from the Department of Justice Assets Forfeiture Fund.
    CBO's May 2019 baseline projects that both forfeiture funds 
will obligate and outlay all of their available balances over a 
period of several years. FinCEN expects that it would have to 
update and expand its information technology systems to carry 
out the bill and, based on information from the agency, CBO 
estimates that those one-time costs would total about $40 
million. CBO expects those funds would be provided to FinCEN 
from the forfeiture funds as directed by the bill. Because 
those funds would have otherwise been spent under current law, 
we estimate that enacting the bill could affect the timing of 
outlays but would not increase direct spending over the 2020-
2029 period.
    Violators of the bill's reporting requirements could be 
subject to civil and criminal penalties, so enacting H.R. 2513 
could increase collections of fines. Civil fines are recorded 
in the budget as revenues. Criminal fines are recorded as 
revenues, deposited in the Crime Victims Fund, and subsequently 
spent without further appropriation. CBO estimates that any 
additional collections would not be significant in any year and 
over the 2020-2029 period because of the relatively small 
number of additional cases likely to be affected.
    Spending subject to appropriation: H.R. 2513 would require 
certain corporations and limited liability companies, or 
applicants to form such entities, to provide information 
annually to FinCEN about the ownership of such entities. Most 
of the entities that would be affected by the bill are small 
businesses that currently are not required to report to FinCEN.
    FinCEN currently receives about 20 million filings each 
year from companies and spends about $23 million annually to 
collect, store, analyze, and disseminate this information. Upon 
enactment of H.R. 2513, the agency expects to receive an 
additional 25 million to 30 million filings each year. On that 
basis, CBO estimates that the agency would need an 
appropriation of $25 million in 2020 to hire additional 
personnel to handle the new filings; those costs would grow 
each year because of expected increases in inflation.
    In addition, the new information provided to FinCEN would 
be available to law enforcement agencies, upon request, and the 
bill would require FinCEN to conduct an annual inspection of 
each such agency to ensure that the requests are legitimate and 
that the information is used appropriately. FinCEN expects that 
it would need to hire five new employees to carry out the 
additional inspection and liaison activities with the law 
enforcement community. CBO estimates that the new employees 
would cost about $1 million annually.
    In total, CBO estimates that implementing H.R. 2513 would 
cost $132 million over the 2020-2024 period for additional 
FinCEN activities.
    Uncertainty: The cost to FinCEN to implement the bill 
depends largely on the number of businesses that would be 
required to file with the agency under H.R. 2513. The budgetary 
effect of the bill could be different if the number of such 
filings differs significantly from CBO's estimate.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. CBO estimates that enacting H.R. 2513 would have 
insignificant effects on direct spending and revenues in each 
year, over the 2019-2024 period, and over the 2019-2029 period.
    Increase in long-term deficits: None.
    Mandates: H.R. 2513 contains intergovernmental and private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA). CBO estimates that the cost of the mandate on public 
entities would fall below the threshold established in UMRA 
($82 million in 2019, adjusted annually for inflation). CBO 
estimates that the cost of the mandates on private-sector 
entities, however, would exceed the threshold established in 
UMRA ($164 million in 2019, adjusted annually for inflation).
    Mandates that apply to public entities: H.R. 2513 would 
require states to notify entities applying to form a 
corporation or an LLC of new requirements to report information 
about beneficial owners. CBO expects that states would include 
the notification in materials provided to applicants for 
corporate or LLC designations and that the cost to update those 
materials would be small.
    Mandates that apply to private entities: H.R. 2513 would 
prohibit a new corporation or LLC formed under state or tribal 
laws from issuing bearer shares. (Bearer shares are equity 
securities wholly owned by the holder of the physical stock 
certificate. Issuers of bearer shares do not register the owner 
of the shares or track ownership transfers.) Because the 
prohibition would not affect existing bearer shares and would 
simply prohibit new shares from being issued, CBO estimates the 
cost of the mandate would be small.
    The bill also would require corporations or LLCs formed 
under state or tribal laws to report the identity of beneficial 
owners to FinCEN and to annually update that information. CBO 
anticipates the bill would generate approximately 25 million to 
30 million new filings each year. Because of the high volume of 
businesses that must meet the new reporting requirements and 
the additional administrative burden to file a new report, CBO 
estimates that the total costs to comply with the mandate would 
be substantial.
    Estimate prepared by: Federal costs: Mark Grabowicz; 
Mandates: Rachel Austin.
    Estimate reviewed by: Kim P. Cawley, Chief, Natural and 
Physical Resources Cost Estimates Unit; Susan Willie, Chief, 
Public and Private Mandates Unit; H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 2513. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

                       Unfunded Mandate Statement

    Pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act (as amended by Section 101(a)(2) of the 
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee 
adopts as its own the estimate of federal mandates regarding 
H.R. 2513, as amended, prepared by the Director of the 
Congressional Budget Office.

                           Advisory Committee

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

              Application of Law to the Legislative Branch

    Pursuant to section 102(b)(3) of the Congressional 
Accountability Act, Pub. L. No. 104-1, H.R. 2513, as amended, 
does not apply to terms and conditions of employment or to 
access to public services or accommodations within the 
legislative branch.

                           Earmark Statement

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 2513 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as described in clauses 9(e), 9(f), and 9(g) of rule 
XXI.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of H.R. 2513 establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
federal program, a program that was included in any report from 
the Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                        Changes to Existing Law

    In compliance with clause 3(e) of Rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, H.R. 2513, as reported, are shown as follows:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                      TITLE 31, UNITED STATES CODE




           *       *       *       *       *       *       *
SUBTITLE IV--MONEY

           *       *       *       *       *       *       *


PART 1--NATIONAL MONEY LAUNDERING AND RELATED FINANCIAL CRIMES STRATEGY

           *       *       *       *       *       *       *


                   CHAPTER 53--MONETARY TRANSACTIONS


               SUBCHAPTER I--CREDIT AND MONETARY EXPANSION

Sec.
5301. Buying obligations of the United States Government.
     * * * * * * *

 SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS

     * * * * * * *
5333. Transparent incorporation practices.

           *       *       *       *       *       *       *


SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS

           *       *       *       *       *       *       *



Sec. 5321. Civil penalties

  (a)(1) A domestic financial institution or nonfinancial trade 
or business, and a partner, director, officer, or employee of a 
domestic financial institution or nonfinancial trade or 
business, willfully violating this subchapter or a regulation 
prescribed or order issued under this subchapter (except 
[sections 5314 and 5315] sections 5314, 5315, and 5333 of this 
title or a regulation prescribed under [sections 5314 and 5315] 
sections 5314, 5315, and 5333), or willfully violating a 
regulation prescribed under section 21 of the Federal Deposit 
Insurance Act or section 123 of Public Law 91-508, is liable to 
the United States Government for a civil penalty of not more 
than the greater of the amount (not to exceed $100,000) 
involved in the transaction (if any) or $25,000. For a 
violation of section 5318(a)(2) of this title or a regulation 
prescribed under section 5318(a)(2), a separate violation 
occurs for each day the violation continues and at each office, 
branch, or place of business at which a violation occurs or 
continues.
  (2) The Secretary of the Treasury may impose an additional 
civil penalty on a person not filing a report, or filing a 
report containing a material omission or misstatement, under 
section 5316 of this title or a regulation prescribed under 
section 5316. A civil penalty under this paragraph may not be 
more than the amount of the monetary instrument for which the 
report was required. A civil penalty under this paragraph is 
reduced by an amount forfeited under section 5317(b) of this 
title.
  (3) A person not filing a report under a regulation 
prescribed under section 5315 of this title or not complying 
with an injunction under section 5320 of this title enjoining a 
violation of, or enforcing compliance with, section 5315 or a 
regulation prescribed under section 5315, is liable to the 
Government for a civil penalty of not more than $10,000.
  (4) Structured Transaction Violation.--
          (A) Penalty authorized.--The Secretary of the 
        Treasury may impose a civil money penalty on any person 
        who violates any provision of section 5324.
          (B) Maximum amount limitation.--The amount of any 
        civil money penalty imposed under subparagraph (A) 
        shall not exceed the amount of the coins and currency 
        (or such other monetary instruments as the Secretary 
        may prescribe) involved in the transaction with respect 
        to which such penalty is imposed.
          (C) Coordination with forfeiture provision.--The 
        amount of any civil money penalty imposed by the 
        Secretary under subparagraph (A) shall be reduced by 
        the amount of any forfeiture to the United States in 
        connection with the transaction with respect to which 
        such penalty is imposed.
  (5) Foreign financial agency transaction violation.--
          (A) Penalty authorized.--The Secretary of the 
        Treasury may impose a civil money penalty on any person 
        who violates, or causes any violation of, any provision 
        of section 5314.
          (B) Amount of penalty.--
                  (i) In general.--Except as provided in 
                subparagraph (C), the amount of any civil 
                penalty imposed under subparagraph (A) shall 
                not exceed $10,000.
                  (ii) Reasonable cause exception.--No penalty 
                shall be imposed under subparagraph (A) with 
                respect to any violation if--
                          (I) such violation was due to 
                        reasonable cause, and
                          (II) the amount of the transaction or 
                        the balance in the account at the time 
                        of the transaction was properly 
                        reported.
          (C) Willful violations.--In the case of any person 
        willfully violating, or willfully causing any violation 
        of, any provision of section 5314--
                  (i) the maximum penalty under subparagraph 
                (B)(i) shall be increased to the greater of--
                          (I) $100,000, or
                          (II) 50 percent of the amount 
                        determined under subparagraph (D), and
                  (ii) subparagraph (B)(ii) shall not apply.
          (D) Amount.--The amount determined under this 
        subparagraph is--
                  (i) in the case of a violation involving a 
                transaction, the amount of the transaction, or
                  (ii) in the case of a violation involving a 
                failure to report the existence of an account 
                or any identifying information required to be 
                provided with respect to an account, the 
                balance in the account at the time of the 
                violation.
  (6) Negligence.--
          (A) In general.--The Secretary of the Treasury may 
        impose a civil money penalty of not more than $500 on 
        any financial institution or nonfinancial trade or 
        business which negligently violates any provision of 
        this subchapter (except section 5333) or any regulation 
        prescribed under this subchapter (except section 5333).
          (B) Pattern of negligent activity.--If any financial 
        institution or nonfinancial trade or business engages 
        in a pattern of negligent violations of any provision 
        of this subchapter (except section 5333) or any 
        regulation prescribed under this subchapter (except 
        section 5333), the Secretary of the Treasury may, in 
        addition to any penalty imposed under subparagraph (A) 
        with respect to any such violation, impose a civil 
        money penalty of not more than $50,000 on the financial 
        institution or nonfinancial trade or business.
  (7) Penalties for international counter money laundering 
violations.--The Secretary may impose a civil money penalty in 
an amount equal to not less than 2 times the amount of the 
transaction, but not more than $1,000,000, on any financial 
institution or agency that violates any provision of subsection 
(i) or (j) of section 5318 or any special measures imposed 
under section 5318A.
  (b) Time Limitations for Assessments and Commencement of 
Civil Actions.--
          (1) Assessments.--The Secretary of the Treasury may 
        assess a civil penalty under subsection (a) at any time 
        before the end of the 6-year period beginning on the 
        date of the transaction with respect to which the 
        penalty is assessed.
          (2) Civil actions.--The Secretary may commence a 
        civil action to recover a civil penalty assessed under 
        subsection (a) at any time before the end of the 2-year 
        period beginning on the later of--
                  (A) the date the penalty was assessed; or
                  (B) the date any judgment becomes final in 
                any criminal action under section 5322 in 
                connection with the same transaction with 
                respect to which the penalty is assessed.
  (c) The Secretary may remit any part of a forfeiture under 
subsection (c) or (d) of section 5317 of this title or civil 
penalty under subsection (a)(2) of this section.
  (d) Criminal Penalty Not Exclusive of Civil Penalty.--A civil 
money penalty may be imposed under subsection (a) with respect 
to any violation of this subchapter notwithstanding the fact 
that a criminal penalty is imposed with respect to the same 
violation.
  (e) Delegation of Assessment Authority to Banking Agencies.--
          (1) In general.--The Secretary of the Treasury shall 
        delegate, in accordance with section 5318(a)(1) and 
        subject to such terms and conditions as the Secretary 
        may impose in accordance with paragraph (3), any 
        authority of the Secretary to assess a civil money 
        penalty under this section on depository institutions 
        (as defined in section 3 of the Federal Deposit 
        Insurance Act) to the appropriate Federal banking 
        agencies (as defined in such section 3).
          (2) Authority of agencies.--Subject to any term or 
        condition imposed by the Secretary of the Treasury 
        under paragraph (3), the provisions of this section 
        shall apply to an appropriate Federal banking agency to 
        which is delegated any authority of the Secretary under 
        this section in the same manner such provisions apply 
        to the Secretary.
          (3) Terms and conditions.--
                  (A) In general.--The Secretary of the 
                Treasury shall prescribe by regulation the 
                terms and conditions which shall apply to any 
                delegation under paragraph (1).
                  (B) Maximum dollar amount.--The terms and 
                conditions authorized under subparagraph (A) 
                may include, in the Secretary's sole 
                discretion, a limitation on the amount of any 
                civil penalty which may be assessed by an 
                appropriate Federal banking agency pursuant to 
                a delegation under paragraph (1).

Sec. 5322. Criminal penalties

  (a) A person willfully violating this subchapter or a 
regulation prescribed or order issued under this subchapter 
(except [section 5315 or 5324] section 5315, 5324, or 5333 of 
this title or a regulation prescribed under [section 5315 or 
5324] section 5315, 5324, or 5333), or willfully violating a 
regulation prescribed under section 21 of the Federal Deposit 
Insurance Act or section 123 of Public Law 91-508, shall be 
fined not more than $250,000, or imprisoned for not more than 
five years, or both.
  (b) A person willfully violating this subchapter or a 
regulation prescribed or order issued under this subchapter 
(except [section 5315 or 5324] section 5315, 5324, or 5333 of 
this title or a regulation prescribed under [section 5315 or 
5324] section 5315, 5324, or 5333), or willfully violating a 
regulation prescribed under section 21 of the Federal Deposit 
Insurance Act or section 123 of Public Law 91-508, while 
violating another law of the United States or as part of a 
pattern of any illegal activity involving more than $100,000 in 
a 12-month period, shall be fined not more than $500,000, 
imprisoned for not more than 10 years, or both.
  (c) For a violation of section 5318(a)(2) of this title or a 
regulation prescribed under section 5318(a)(2), a separate 
violation occurs for each day the violation continues and at 
each office, branch, or place of business at which a violation 
occurs or continues.
  (d) A financial institution or agency that violates any 
provision of subsection (i) or (j) of section 5318, or any 
special measures imposed under section 5318A, or any regulation 
prescribed under subsection (i) or (j) of section 5318 or 
section 5318A, shall be fined in an amount equal to not less 
than 2 times the amount of the transaction, but not more than 
$1,000,000.

           *       *       *       *       *       *       *


Sec. 5333 Transparent incorporation practices

  (a) Reporting Requirements.--
          (1) Beneficial ownership reporting.--
                  (A) In general.--Each applicant to form a 
                corporation or limited liability company under 
                the laws of a State or Indian Tribe shall file 
                a report with FinCEN containing a list of the 
                beneficial owners of the corporation or limited 
                liability company that--
                          (i) except as provided in paragraphs 
                        (3) and (4), and subject to paragraph 
                        (2), identifies each beneficial owner 
                        by--
                                  (I) full legal name;
                                  (II) date of birth;
                                  (III) current residential or 
                                business street address; and
                                  (IV) a unique identifying 
                                number from a non-expired 
                                passport issued by the United 
                                States, a non-expired personal 
                                identification card, or a non-
                                expired driver's license issued 
                                by a State; and
                          (ii) if the applicant is not a 
                        beneficial owner, also provides the 
                        identification information described in 
                        clause (i) relating to such applicant.
                  (B) Updated information.--Each corporation or 
                limited liability company formed under the laws 
                of a State or Indian Tribe shall--
                          (i) submit to FinCEN an annual filing 
                        containing a list of--
                                  (I) the current beneficial 
                                owners of the corporation or 
                                limited liability company and 
                                the information described in 
                                subparagraph (A) for each such 
                                beneficial owner; and
                                  (II) any changes in the 
                                beneficial owners of the 
                                corporation or limited 
                                liability company during the 
                                previous year; and
                          (ii) pursuant to any rule issued by 
                        the Secretary of the Treasury under 
                        subparagraph (C), update the list of 
                        the beneficial owners of the 
                        corporation or limited liability 
                        company within the time period 
                        prescribed by such rule.
                  (C) Rulemaking on updating information.--Not 
                later than 9 months after the completion of the 
                study required under section 4(a)(1) of the 
                Corporate Transparency Act of 2019, the 
                Secretary of the Treasury shall consider the 
                findings of such study and, if the Secretary 
                determines it to be necessary or appropriate, 
                issue a rule requiring corporations and limited 
                liability companies to update the list of the 
                beneficial owners of the corporation or limited 
                liability company within a specified amount of 
                time after the date of any change in the list 
                of beneficial owners or the information 
                required to be provided relating to each 
                beneficial owner.
                  (D) State notification.--Each State in which 
                a corporation or limited liability company is 
                being formed shall notify each applicant of the 
                requirements listed in subparagraphs (A) and 
                (B).
          (2) Certain beneficial owners.--If an applicant to 
        form a corporation or limited liability company or a 
        beneficial owner, or similar agent of a corporation or 
        limited liability company who is required to provide 
        identification information under this subsection, does 
        not have a nonexpired passport issued by the United 
        States, a nonexpired personal identification card, or a 
        non-expired driver's license issued by a State, each 
        such person shall provide to FinCEN the full legal 
        name, current residential or business street address, a 
        unique identifying number from a non-expired passport 
        issued by a foreign government, and a legible and 
        credible copy of the pages of a non-expired passport 
        issued by the government of a foreign country bearing a 
        photograph, date of birth, and unique identifying 
        information for each beneficial owner, and each 
        application described in paragraph (1)(A) and each 
        update described in paragraph (1)(B) shall include a 
        written certification by a person residing in the State 
        or Indian country under the jurisdiction of the Indian 
        Tribe forming the entity that the applicant, 
        corporation, or limited liability company--
                  (A) has obtained for each such beneficial 
                owner, a current residential or business street 
                address and a legible and credible copy of the 
                pages of a non-expired passport issued by the 
                government of a foreign country bearing a 
                photograph, date of birth, and unique 
                identifying information for the person;
                  (B) has verified the full legal name, 
                address, and identity of each such person;
                  (C) will provide the information described in 
                subparagraph (A) and the proof of verification 
                described in subparagraph (B) upon request of 
                FinCEN; and
                  (D) will retain the information and proof of 
                verification under this paragraph until the end 
                of the 5-year period beginning on the date that 
                the corporation or limited liability company 
                terminates under the laws of the State or 
                Indian Tribe.
          (3) Exempt entities.--
                  (A) In general.--With respect to an applicant 
                to form a corporation or limited liability 
                company under the laws of a State or Indian 
                Tribe, if such entity is described in 
                subparagraph (C) or (D) of subsection (d)(4) 
                and will be exempt from the beneficial 
                ownership disclosure requirements under this 
                subsection, such applicant, or a prospective 
                officer, director, or similar agent of the 
                applicant, shall file a written certification 
                with FinCEN--
                          (i) identifying the specific 
                        provision of subsection (d)(4) under 
                        which the entity proposed to be formed 
                        would be exempt from the beneficial 
                        ownership disclosure requirements under 
                        paragraphs (1) and (2);
                          (ii) stating that the entity proposed 
                        to be formed meets the requirements for 
                        an entity described under such 
                        provision of subsection (d)(4); and
                          (iii) providing identification 
                        information for the applicant or 
                        prospective officer, director, or 
                        similar agent making the certification 
                        in the same manner as provided under 
                        paragraph (1) or (2).
                  (B) Existing corporations or limited 
                liability companies.--On and after the date 
                that is 2 years after the final regulations are 
                issued to carry out this section, a corporation 
                or limited liability company formed under the 
                laws of the State or Indian Tribe before such 
                date shall be subject to the requirements of 
                this subsection unless an officer, director, or 
                similar agent of the entity submits to FinCEN a 
                written certification--
                          (i) identifying the specific 
                        provision of subsection (d)(4) under 
                        which the entity is exempt from the 
                        requirements under paragraphs (1) and 
                        (2);
                          (ii) stating that the entity meets 
                        the requirements for an entity 
                        described under such provision of 
                        subsection (d)(4); and
                          (iii) providing identification 
                        information for the officer, director, 
                        or similar agent making the 
                        certification in the same manner as 
                        provided under paragraph (1) or (2).
                  (C) Exempt entities having ownership 
                interest.--If an entity described in 
                subparagraph (C) or (D) of subsection (d)(4) 
                has or will have an ownership interest in a 
                corporation or limited liability company formed 
                or to be formed under the laws of a State or 
                Indian Tribe, the applicant, corporation, or 
                limited liability company in which the entity 
                has or will have the ownership interest shall 
                provide the information required under this 
                subsection relating to the entity, except that 
                the entity shall not be required to provide 
                information regarding any natural person who 
                has an ownership interest in, exercises 
                substantial control over, or receives 
                substantial economic benefits from the entity.
          (4) Fincen id numbers.--
                  (A) Issuance of fincen id number.--
                          (i) In general.--FinCEN shall issue a 
                        FinCEN ID number to any individual who 
                        requests such a number and provides 
                        FinCEN with the information described 
                        under subclauses (I) through (IV) of 
                        paragraph (1)(A)(i).
                          (ii) Updating of information.--An 
                        individual with a FinCEN ID number 
                        shall submit an annual filing with 
                        FinCEN updating any information 
                        described under subclauses (I) through 
                        (IV) of paragraph (1)(A)(i).
                  (B) Use of fincen id number in reporting 
                requirements.--Any person required to report 
                the information described under paragraph 
                (1)(A)(i) with respect to an individual may 
                instead report the FinCEN ID number of the 
                individual.
                  (C) Treatment of information submitted for 
                fincen id number.--For purposes of this 
                section, any information submitted under 
                subparagraph (A) shall be deemed to be 
                beneficial ownership information.
          (5) Retention and disclosure of beneficial ownership 
        information by fincen.--
                  (A) Retention of information.--Beneficial 
                ownership information relating to each 
                corporation or limited liability company formed 
                under the laws of the State or Indian Tribe 
                shall be maintained by FinCEN until the end of 
                the 5-year period (or such other period of time 
                as the Secretary of the Treasury may, by rule, 
                determine) beginning on the date that the 
                corporation or limited liability company 
                terminates.
                  (B) Disclosure of information.--Beneficial 
                ownership information reported to FinCEN 
                pursuant to this section shall be provided by 
                FinCEN only upon receipt of--
                          (i) subject to subparagraph (C), a 
                        request, through appropriate protocols, 
                        by a local, Tribal, State, or Federal 
                        law enforcement agency;
                          (ii) a request made by a Federal 
                        agency on behalf of a law enforcement 
                        agency of another country under an 
                        international treaty, agreement, or 
                        convention, or an order under section 
                        3512 of title 18 or section 1782 of 
                        title 28; or
                          (iii) a request made by a financial 
                        institution, with customer consent, as 
                        part of the institution's compliance 
                        with due diligence requirements imposed 
                        under the Bank Secrecy Act, the USA 
                        PATRIOT Act, or other applicable 
                        Federal, State, or Tribal law.
                  (C) Appropriate protocols.--
                          (i) Privacy.--The protocols described 
                        in subparagraph (B)(i) shall--
                                  (I) protect the privacy of 
                                any beneficial ownership 
                                information provided by FinCEN 
                                to a local, Tribal, State, or 
                                Federal law enforcement agency;
                                  (II) ensure that a local, 
                                Tribal, State, or Federal law 
                                enforcement agency requesting 
                                beneficial ownership 
                                information has an existing 
                                investigatory basis for 
                                requesting such information;
                                  (III) ensure that access to 
                                beneficial ownership 
                                information is limited to 
                                authorized users at a local, 
                                Tribal, State, or Federal law 
                                enforcement agency who have 
                                undergone appropriate training, 
                                and that the identity of such 
                                authorized users is verified 
                                through appropriate mechanisms, 
                                such as two-factor 
                                authentication;
                                  (IV) include an audit trail 
                                of requests for beneficial 
                                ownership information by a 
                                local, Tribal, State, or 
                                Federal law enforcement agency, 
                                including, as necessary, 
                                information concerning queries 
                                made by authorized users at a 
                                local, Tribal, State, or 
                                Federal law enforcement agency;
                                  (V) require that every local, 
                                Tribal, State, or Federal law 
                                enforcement agency that 
                                receives beneficial ownership 
                                information from FinCEN 
                                conducts an annual audit to 
                                verify that the beneficial 
                                ownership information received 
                                from FinCEN has been accessed 
                                and used appropriately, and 
                                consistent with this paragraph; 
                                and
                                  (VI) require FinCEN to 
                                conduct an annual audit of 
                                every local, Tribal, State, or 
                                Federal law enforcement agency 
                                that has received beneficial 
                                ownership information to ensure 
                                that such agency has requested 
                                beneficial ownership 
                                information, and has used any 
                                beneficial ownership 
                                information received from 
                                FinCEN, appropriately, and 
                                consistent with this paragraph.
                          (ii) Limitation on use.--Beneficial 
                        ownership information provided to a 
                        local, Tribal, State, or Federal law 
                        enforcement agency under this paragraph 
                        may only be used for law enforcement, 
                        national security, or intelligence 
                        purposes.
  (b) No Bearer Share Corporations or Limited Liability 
Companies.--A corporation or limited liability company formed 
under the laws of a State or Indian Tribe may not issue a 
certificate in bearer form evidencing either a whole or 
fractional interest in the corporation or limited liability 
company.
  (c) Penalties.--
          (1) In general.--It shall be unlawful for any person 
        to affect interstate or foreign commerce by--
                  (A) knowingly providing, or attempting to 
                provide, false or fraudulent beneficial 
                ownership information, including a false or 
                fraudulent identifying photograph, to FinCEN in 
                accordance with this section;
                  (B) willfully failing to provide complete or 
                updated beneficial ownership information to 
                FinCEN in accordance with this section; or
                  (C) knowingly disclosing the existence of a 
                subpoena or other request for beneficial 
                ownership information reported pursuant to this 
                section, except--
                          (i) to the extent necessary to 
                        fulfill the authorized request; or
                          (ii) as authorized by the entity that 
                        issued the subpoena, or other request.
          (2) Civil and criminal penalties.--Any person who 
        violates paragraph (1)--
                  (A) shall be liable to the United States for 
                a civil penalty of not more than $10,000; and
                  (B) may be fined under title 18, United 
                States Code, imprisoned for not more than 3 
                years, or both.
          (3) Limitation.--Any person who negligently violates 
        paragraph (1) shall not be subject to civil or criminal 
        penalties under paragraph (2).
          (4) Waiver.--The Secretary of the Treasury may waive 
        the penalty for violating paragraph (1) if the 
        Secretary determines that the violation was due to 
        reasonable cause and was not due to willful neglect.
          (5) Criminal penalty for the misuse or unauthorized 
        disclosure of beneficial ownership information.--The 
        criminal penalties provided for under section 5322 
        shall apply to a violation of this section to the same 
        extent as such criminal penalties apply to a violation 
        described in section 5322, if the violation of this 
        section consists of the misuse or unauthorized 
        disclosure of beneficial ownership information.
  (d) Definitions.--For the purposes of this section:
          (1) Applicant.--The term ``applicant'' means any 
        natural person who files an application to form a 
        corporation or limited liability company under the laws 
        of a State or Indian Tribe.
          (2) Bank secrecy act.--The term ``Bank Secrecy Act'' 
        means--
                  (A) section 21 of the Federal Deposit 
                Insurance Act;
                  (B) chapter 2 of title I of Public Law 91-
                508; and
                  (C) this subchapter.
          (3) Beneficial owner.--
                  (A) In general.--Except as provided in 
                subparagraph (B), the term ``beneficial owner'' 
                means a natural person who, directly or 
                indirectly, through any contract, arrangement, 
                understanding, relationship, or otherwise--
                          (i) exercises substantial control 
                        over a corporation or limited liability 
                        company;
                          (ii) owns 25 percent or more of the 
                        equity interests of a corporation or 
                        limited liability company; or
                          (iii) receives substantial economic 
                        benefits from the assets of a 
                        corporation or limited liability 
                        company.
                  (B) Exceptions.--The term ``beneficial 
                owner'' shall not include--
                          (i) a minor child, as defined in the 
                        State or Indian Tribe in which the 
                        entity is formed;
                          (ii) a person acting as a nominee, 
                        intermediary, custodian, or agent on 
                        behalf of another person;
                          (iii) a person acting solely as an 
                        employee of a corporation or limited 
                        liability company and whose control 
                        over or economic benefits from the 
                        corporation or limited liability 
                        company derives solely from the 
                        employment status of the person;
                          (iv) a person whose only interest in 
                        a corporation or limited liability 
                        company is through a right of 
                        inheritance; or
                          (v) a creditor of a corporation or 
                        limited liability company, unless the 
                        creditor also meets the requirements of 
                        subparagraph (A).
                  (C) Substantial economic benefits defined.--
                          (i) In general.--For purposes of 
                        subparagraph (A)(ii), a natural person 
                        receives substantial economic benefits 
                        from the assets of a corporation or 
                        limited liability company if the person 
                        has an entitlement to more than a 
                        specified percentage of the funds or 
                        assets of the corporation or limited 
                        liability company, which the Secretary 
                        of the Treasury shall, by rule, 
                        establish.
                          (ii) Rulemaking criteria.--In 
                        establishing the percentage under 
                        clause (i), the Secretary of the 
                        Treasury shall seek to--
                                  (I) provide clarity to 
                                corporations and limited 
                                liability companies with 
                                respect to the identification 
                                and disclosure of a natural 
                                person who receives substantial 
                                economic benefits from the 
                                assets of a corporation or 
                                limited liability company; and
                                  (II) identify those natural 
                                persons who, as a result of the 
                                substantial economic benefits 
                                they receive from the assets of 
                                a corporation or limited 
                                liability company, exercise a 
                                dominant influence over such 
                                corporation or limited 
                                liability company.
          (4) Corporation; limited liability company.--The 
        terms ``corporation'' and ``limited liability 
        company''--
                  (A) have the meanings given such terms under 
                the laws of the applicable State or Indian 
                Tribe;
                  (B) include any non-United States entity 
                eligible for registration or registered to do 
                business as a corporation or limited liability 
                company under the laws of the applicable State 
                or Indian Tribe;
                  (C) do not include any entity that is--
                          (i) a business concern that is an 
                        issuer of a class of securities 
                        registered under section 12 of the 
                        Securities Exchange Act of 1934 (15 
                        U.S.C. 781) or that is required to file 
                        reports under section 15(d) of that Act 
                        (15 U.S.C. 78o(d));
                          (ii) a business concern constituted, 
                        sponsored, or chartered by a State or 
                        Indian Tribe, a political subdivision 
                        of a State or Indian Tribe, under an 
                        interstate compact between two or more 
                        States, by a department or agency of 
                        the United States, or under the laws of 
                        the United States;
                          (iii) a depository institution (as 
                        defined in section 3 of the Federal 
                        Deposit Insurance Act (12 U.S.C. 
                        1813));
                          (iv) a credit union (as defined in 
                        section 101 of the Federal Credit Union 
                        Act (12 U.S.C. 1752));
                          (v) a bank holding company (as 
                        defined in section 2 of the Bank 
                        Holding Company Act of 1956 (12 U.S.C. 
                        1841)) or a savings and loan holding 
                        company (as defined in section 10(a) of 
                        the Home Owners' Loan Act (12 U.S.C. 
                        1467a(a));
                          (vi) a broker or dealer (as defined 
                        in section 3 of the Securities Exchange 
                        Act of 1934 (15 U.S.C. 78c)) that is 
                        registered under section 15 of the 
                        Securities Exchange Act of 1934 (15 
                        U.S.C. 78o);
                          (vii) an exchange or clearing agency 
                        (as defined in section 3 of the 
                        Securities Exchange Act of 1934 (15 
                        U.S.C. 78c)) that is registered under 
                        section 6 or 17A of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78f and 
                        78q-1);
                          (viii) an investment company (as 
                        defined in section 3 of the Investment 
                        Company Act of 1940 (15 U.S.C. 80a-3)) 
                        or an investment adviser (as defined in 
                        section 202(11) of the Investment 
                        Advisers Act of 1940 (15 U.S.C. 80b-
                        2(11))), if the company or adviser is 
                        registered with the Securities and 
                        Exchange Commission, has filed an 
                        application for registration which has 
                        not been denied, under the Investment 
                        Company Act of 1940 (15 U.S.C. 80a-1 et 
                        seq.) or the Investment Adviser Act of 
                        1940 (15 U.S.C. 80b-1 et seq.), or is 
                        an investment adviser described under 
                        section 203(l) of the Investment 
                        Advisers Act of 1940 (15 U.S.C. 80b-
                        3(l));
                          (ix) an insurance company (as defined 
                        in section 2 of the Investment Company 
                        Act of 1940 (15 U.S.C. 80a-2));
                          (x) a registered entity (as defined 
                        in section 1a of the Commodity Exchange 
                        Act (7 U.S.C. 1a)), or a futures 
                        commission merchant, introducing 
                        broker, commodity pool operator, or 
                        commodity trading advisor (as defined 
                        in section 1a of the Commodity Exchange 
                        Act (7 U.S.C. 1a)) that is registered 
                        with the Commodity Futures Trading 
                        Commission;
                          (xi) a public accounting firm 
                        registered in accordance with section 
                        102 of the Sarbanes-Oxley Act (15 
                        U.S.C. 7212) or an entity controlling, 
                        controlled by, or under common control 
                        of such a firm;
                          (xii) a public utility that provides 
                        telecommunications service, electrical 
                        power, natural gas, or water and sewer 
                        services, within the United States;
                          (xiii) a church, charity, nonprofit 
                        entity, or other organization that is 
                        described in section 501(c), 527, or 
                        4947(a)(1) of the Internal Revenue Code 
                        of 1986, that has not been denied tax 
                        exempt status, and that has filed the 
                        most recently due annual information 
                        return with the Internal Revenue 
                        Service, if required to file such a 
                        return;
                          (xiv) a financial market utility 
                        designated by the Financial Stability 
                        Oversight Council under section 804 of 
                        the Dodd-Frank Wall Street Reform and 
                        Consumer Protection Act;
                          (xv) an insurance producer (as 
                        defined in section 334 of the Gramm-
                        Leach-Bliley Act);
                          (xvi) any business concern that--
                                  (I) employs more than 20 
                                employees on a full-time basis 
                                in the United States;
                                  (II) files income tax returns 
                                in the United States 
                                demonstrating more than 
                                $5,000,000 in gross receipts or 
                                sales; and
                                  (III) has an operating 
                                presence at a physical office 
                                within the United States; or
                          (xvii) any corporation or limited 
                        liability company formed and owned by 
                        an entity described in this clause or 
                        in clause (i), (ii), (iii), (iv), (v), 
                        (vi), (vii), (viii), (ix), (x), (xi), 
                        (xii), (xiii), (xiv), (xv), or (xvi); 
                        and
                  (D) do not include any individual business 
                concern or class of business concerns which the 
                Secretary of the Treasury and the Attorney 
                General of the United States have jointly 
                determined, by rule of otherwise, to be exempt 
                from the requirements of subsection (a), if the 
                Secretary and the Attorney General jointly 
                determine that requiring beneficial ownership 
                information from the business concern would not 
                serve the public interest and would not assist 
                law enforcement efforts to detect, prevent, or 
                prosecute terrorism, money laundering, tax 
                evasion, or other misconduct.
          (5) Fincen.--The term ``FinCEN'' means the Financial 
        Crimes Enforcement Network of the Department of the 
        Treasury.
          (6) Indian country.--The term ``Indian country'' has 
        the meaning given that term in section 1151 of title 
        18.
          (7) Indian tribe.--The term ``Indian Tribe'' has the 
        meaning given that term under section 102 of the 
        Federally Recognized Indian Tribe List Act of 1994.
          (8) Personal identification card.--The term 
        ``personal identification card'' means an 
        identification document issued by a State, Indian 
        Tribe, or local government to an individual solely for 
        the purpose of identification of that individual.
          (9) State.--The term ``State'' means any State, 
        commonwealth, territory, or possession of the United 
        States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Commonwealth of the Northern Mariana 
        Islands, American Samoa, Guam, or the United States 
        Virgin Islands.

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    The undersigned view H.R. 2513, the Corporate Transparency 
Act, as another costly burden on those entities that can least 
afford it--Small Businesses.
    H.R. 2513 institutes a new requirement that each 
corporation and limited liability company (LLC) submit 
beneficial ownership information, including names, dates of 
birth, addresses, driver's license information, and Social 
Security numbers directly with the Treasury Department's 
Financial Crimes Enforcement Network (FinCEN) when an entity as 
defined by H.R. 2513 is formed and annually thereafter. A 
beneficial owner is defined by H.R. 2513 as: an individual 
owning 25 percent or more in equity; an individual who 
exercises substantial control over a corporation or LLC; or an 
individual who receives substantial economic benefit from the 
entity's assets. H.R. 2513 applies to corporations and LLCs 
with fewer than 20 employees; or that generate less than 
$5,000,000 in annual gross receipts or sales. Failure to comply 
with H.R. 2513 could result in fines up to $10,000 or up to 
three years in prison.
    According to the National Federation of Independent 
Businesses, nearly 4 million American small businesses will be 
captured by H.R. 2513's arbitrary small business reporting 
threshold. In particular, the NFIB stated, ``while large 
businesses and financial institutions may have access to teams 
of lawyers, accountants, and compliance experts to gather 
beneficial ownership information and report it to the 
government, small business owners do not. Small business owners 
cannot afford accounting and legal experts to help them 
understand and comply with the new federal reporting 
requirements. And small business owners lack the time to track 
and gather information to fill out yet more forms for the 
government.''\1\
---------------------------------------------------------------------------
    \1\https://www.nfib.com/assets/04-18-19-Letter-to-Representative-
Maloney-Draft-Corporate-Transparency-Act.pdf
---------------------------------------------------------------------------
    Moreover, H.R. 2513 fails to repeal and replace the 
Customer Due Diligence (CDD) rule, of which financial 
institutions have been critical. The supposed justification for 
this bill is the burden associated with implementing the CDD 
rule. However, CDD will continue to co-exist with H.R. 2513. 
The result could be a duplicative regulatory burden on millions 
of small businesses that do not have the internal 
infrastructure to meet these elevated compliance demands.
    H.R. 2513 also raises significant privacy concerns. 
Sensitive and personally identifiable beneficial ownership 
information will be held in a new central federal repository. 
The repository will be accessible to local, Tribal, State, or 
Federal law enforcement agencies. However, H.R. 2513 does not 
require a subpoena or warrant to access this information. 
Additionally, the Corporate Transparency Act mandates that 
FinCEN disclose the information to any financial institution, 
as long as there is customer consent. To that end, Committee 
Republicans are concerned this leaves personal information 
vulnerable to unaccountable individuals and third parties 
affiliated with the customer and unchecked law enforcement 
agencies. Furthermore, without safeguards in place to ensure 
confidentiality and safety of small business owner information, 
H.R. 2513 will leave personally identifiable information 
vulnerable to data breach and other cyber security risks.
    Finally, Republicans remain concerned that H.R. 2513 is 
based on anecdote rather than data. To date, and despite 
multiple requests from the Ranking Member of the Committee and 
other Financial Services Committee Republicans, the Treasury 
Department, FinCEN, and the Department of Justice have failed 
to provide adequate data to demonstrate the need for the 
legislation. Moreover, those agencies have neglected to provide 
solutions to small business and privacy concerns raised by a 
bipartisan group of Committee members. Finally, in 2018, 
Committee Republicans requested the Government Accountability 
Office (GAO) to conduct a study on beneficial ownership and 
FinCEN's CDD rule. The GAO request followed two earlier GAO 
requests relating to Bank Secrecy Act and anti-money laundering 
implementation, costs, and benefits. GAO has yet to finalize 
these reports. Without fully understanding the small business 
threshold implications and how H.R. 2513 will protect against 
sophisticated money launders that can circumvent the beneficial 
ownership filing requirements by forming a business trust or 
partnership, both of which are exempted in H.R. 2513, Committee 
Republicans believe this legislation is premature. Finally, 
Republicans have yet to receive information on whether this 
legislation will assist law enforcement meet its aim of 
preventing, deterring, and responding to terrorism and illicit 
finance.

                                   Lance Gooden.
                                   Scott Tipton.
                                   Bryan Steil.
                                   Denver Riggleman.
                                   Tom Emmer.
                                   Warren Davidson.
                                   Alexander X. Mooney.
                                   Ann Wagner.
                                   Bill Posey.
                                   Trey Hollingsworth.
                                   Anthony Gonzalez.
                                   John W. Rose.
                                   French Hill.
                                   Patrick T. McHenry.
                                   Andy Barr.
                                   Steve Stivers.

                                  [all]