Sec. 401. Beneficial ownership

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Chapter 53 of title 31, United States Code, as amended by section 207 of this Act, is amended by adding at the end the following: In this section: A natural person has an acceptable identification document if that person has a nonexpired passport issued by the United States, a nonexpired identification document issued by a State, local government, or Federally recognized Indian Tribe to an individual acting for the purpose of identification of that individual, or a nonexpired driver’s license issued by a State, or, if the natural person does not have any such document, a nonexpired passport issued by a foreign government.

The term beneficial owner — means, with respect to an entity, a natural person who directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise— exercises substantial control over such entity; or owns 25 percent or more of the equity interests of such entity or receives substantial economic benefits from the assets of such entity; and does not include— a minor child, as defined in the State in which the entity is formed; a person acting as a nominee, intermediary, custodian, or agent on behalf of another person; 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; a person whose only interest in a corporation or limited liability company is through a right of inheritance; or a creditor of a corporation or limited liability company, unless the creditor meets the requirements of subparagraph (A).

The term Director means the Director of FinCEN. The term FinCEN means the Financial Crimes Enforcement Network of the Department of the Treasury. The term FinCEN identifier means the unique identifying number assigned by FinCEN to a person under this section. The term reporting company — means a corporation, limited liability company, or other similar entity that is— created by the filing of a document with a secretary of state or a similar office under the law of a State or Indian tribe; or formed under the law of a foreign country and registered to do business in a State by the filing of a document with a secretary of state or a similar office under the law of the State; and does not include— 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) ); a business concern constituted or sponsored by a State, a political subdivision of a State, 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; a depository institution (as defined in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 )); a credit union (as defined in section 101 of the Federal Credit Union Act ( 12 U.S.C. 1752 )); a bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1841 )); 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 ); 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); 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) )), including an investment adviser described in section 203(l) of the Investment Advisers Act of 1940 ( 15 U.S.C. 80b–3(l) ), if the company or adviser is registered with the Securities and Exchange Commission, or 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 Advisers Act of 1940 ( 15 U.S.C. 80b–1 et seq.); an insurance company (as defined in section 2 of the Investment Company Act of 1940 ( 15 U.S.C. 80a–2 )); an insurance producer (as defined in section 334 of the Gramm-Leach-Bliley Act ( 15 U.S.C. 6764 )); 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; a public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act ( 15 U.S.C. 7212 ); a public utility that provides telecommunications services, electrical power, natural gas, or water and sewer services, within the United States; a church, charity, nonprofit entity, or other organization that is described in section 501(c), 527, 4947(a)(1), or 4947(a)(2) of the Internal Revenue Code of 1986, that has not been denied tax-exempt status, and that has not failed to file the most recently due annual information return with the Internal Revenue Service pursuant to section 6033(a) of the Internal Revenue Code of 1986, if required to file such a return, for 3 consecutive years, provided however, that an entity described in this clause shall not be considered a corporation or limited liability company until the period of time 180 days immediately following the date of its denial of tax-exempt status or failure to file its annual information return pursuant to section 6033(a) of the Internal Revenue Code of 1986 for 3 consecutive years; any business concern that— employs more than 20 employees on a full-time basis in the United States; files income tax returns in the United States demonstrating more than $5,000,000 in gross receipts or sales; and has an operating presence at a physical office within the United States; any corporation or limited liability company formed and owned by an entity described in clause (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii), or (xiv); any pooled investment vehicle that is operated or advised by an entity described in clause (iii), (iv), (v), (vi), (vii), (viii), (ix), or (x); or any business concern or class of business concerns that the Secretary of the Treasury, with the written concurrence of the Attorney General and the Secretary of Homeland Security, has determined should be exempt from the requirements of subsection

(a)because requiring beneficial ownership information from the business concern or class of business concerns would not serve the public interest and would not assist law enforcement efforts to detect, prevent, or punish terrorism, money laundering, tax evasion, or other misconduct. 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. For the purposes of this section, a person receives substantial economic benefits from an entity if the person has access to 25 percent or more of the funds and assets of the entity. The Secretary of the Treasury shall seek to provide clarity to entities with respect to the identification and disclosure of an individual who receives substantial economic benefits from the funds and assets of an entity. The term unique identifying number with respect to a natural person or a limited liability company with a sole member means the unique identifying number from a nonexpired passport issued by the United States, a nonexpired personal identification card, or a nonexpired driver’s license issued by a State. In accordance with regulations prescribed by the Secretary of the Treasury, each reporting company shall submit to FinCEN a report that contains the information described in paragraph (2). In accordance with regulations prescribed by the Secretary of the Treasury, any reporting company that has been formed under the laws of a State or Indian Tribe prior to the date of enactment of this section, shall, in a timely manner, and not later than 2 years after the date of enactment of this section, submit to FinCEN a report that contains the information described in paragraph (2). In accordance with regulations prescribed by the Secretary of the Treasury, any reporting company that has been formed under the laws of a State or Indian Tribe after the date of enactment of this section, shall, at the time of incorporation, submit to FinCEN a report that contains the information described in paragraph (2). In accordance with regulations prescribed by the Secretary of the Treasury, a reporting company shall, in a timely manner, and not later than 90 days after the date on which there is a change with respect to any beneficial owner of the reporting company, deliver to FinCEN a report that includes the information described in paragraph (2). In accordance with regulations prescribed by the Secretary of the Treasury, a reporting company shall, in a timely manner, and not later than 1 year after the date on which there are any changes to the information described in paragraph (2), deliver to FinCEN a report that includes the information described in that paragraph. In promulgating the regulations prescribed in subparagraphs

(A)through (E), the Secretary of the Treasury shall endeavor, to the extent practicable— to collect information through existing Federal, State, and local processes and procedures; to minimize burdens on reporting companies associated with the collection of the information described in paragraph

(2)in light of the costs placed on legitimate businesses; to collect such information, including any updates in beneficial ownership, to ensure the usefulness of beneficial ownership information for law enforcement and national security purposes; to establish partnerships with State, local, and Tribal governmental agencies; and to permit any entity that is not a reporting company to demand and receive from FinCEN written confirmation that the entity is not subject to the requirements of this subsection. In this paragraph, the term applicant means, with respect to a reporting company, any individual who files an application to form a corporation or limited liability company under the laws of a State or Indian Tribe on behalf of the reporting company. In accordance with regulations prescribed by the Secretary of the Treasury, a report delivered under paragraph

(1)shall identify each beneficial owner of the applicable reporting company and each applicant with respect to that reporting company by— full legal name; date of birth; current, as of the date on which the report is delivered, residential or business street address; and the unique identifying number with respect to the beneficial owner from a nonexpired passport issued by the United States, a nonexpired personal identification card, or a nonexpired driver’s license issued by a State. FinCEN shall issue a FinCEN ID number to any individual who requests such a number and provides FinCEN with the information described in paragraph (2). An individual with a FinCEN ID number shall submit filings with FinCEN pursuant to paragraph

(1)updating any information described in paragraph (2). Any person required to report the information described in paragraph

(2)with respect to an individual may instead report the FinCEN ID number of the individual. For purposes of this section, any information submitted under subparagraph

(A)shall be deemed to be beneficial ownership information. The requirements of this subsection shall take effect on the effective date of the regulations prescribed by the Secretary of the Treasury under this subsection, which effective date shall not be sooner than the date that is 1 year after the date of enactment of this section. Beneficial ownership information required under subsection (b)(2) relating to each corporation or limited liability company formed under the laws of the State shall be maintained by FinCEN until the end of the 5-year period beginning on the date that the corporation or limited liability company terminates. Beneficial ownership information reported to FinCEN pursuant to this section shall be provided by FinCEN only upon receipt of— a request, through appropriate protocols, by a local, Tribal, State, or Federal law enforcement, national security, or intelligence agency; 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, issued in response to a request for assistance in an investigation by such foreign country, subject to the requirement that such other country agrees to prevent the public disclosure of such beneficial ownership information or to use it for any purpose other than the specified investigation, or, if upon agreement by the Federal agency and the foreign country, in a criminal or civil case; or a request made by a financial institution or any other entity or person subject to customer due diligence requirements, with the consent of the reporting company, to facilitate the compliance of the financial institution or other entity or person with customer due diligence requirements under applicable Federal law or State law. The protocols described in paragraph (2)(A) shall— protect the privacy of any beneficial ownership information provided by FinCEN to a local, Tribal, State, or Federal law enforcement, national security, or intelligence agency; ensure that a local, Tribal, State, or Federal law enforcement, national security, or intelligence agency requesting beneficial ownership information has an existing investigatory basis for requesting such information and that basis is not in violation of a local, or city ordinance; ensure that access to beneficial ownership information is limited to authorized users at a local, Tribal, State, or Federal law enforcement, national security, or intelligence agency who have undergone appropriate training, and that the identity of such authorized users is verified through appropriate mechanisms such as 2-factor authentication; include an audit trail of requests for beneficial ownership information by a local, Tribal, State, or Federal law enforcement, national security, or intelligence agency, including, as necessary, information concerning queries made by authorized users at a local, Tribal, State, or Federal law enforcement, national security, or intelligence agency; require that every local, Tribal, State, or Federal law enforcement, national security, or intelligence 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 require FinCEN to conduct an annual audit of every local, Tribal, State, or Federal law enforcement, national security, or intelligence 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. A request under paragraph (2)(A) that violates the protocols described in paragraph

(3)shall subject the requesting agency to criminal penalties under subsection (g)(3). Information provided to a local, Tribal, State, or Federal law enforcement, national security, or intelligence agency under this paragraph may only be used for law enforcement, anti-money laundering, counter-terrorism-financing, national security, or intelligence purposes. The Secretary of the Treasury shall endeavor, to the extent practicable, to update information described in subsection (b)(2) by working collaboratively with other relevant Federal agencies. Relevant Federal agencies, as determined by the Secretary of the Treasury, shall, to the extent practicable, and consistent with privacy protections, provide such required information to FinCEN for purposes of maintaining an accurate beneficial ownership database. The Secretary of the Treasury, in consultation with the heads of other relevant agencies, may promulgate regulations as necessary to carry out this subsection. Each State that receives funding under section 5334(c) shall, not later than 2 years after the date of enactment of this section, take the following actions: The Secretary of State or a similar office in each State responsible for the establishment of entities created by the filing of a public document with such office under the law of such State shall periodically, including at the time of any renewal of any license to do business in such State and in connection with State corporate tax renewals, notify filers of their requirements as reporting companies under this section, including the requirement under subparagraph (b)(1)(B), and provide them with a copy of the reporting company form created by the Secretary under this section or an internet link to such form. The Secretary of State or a similar office in each State responsible for the establishment of entities created by the filing of a public document with such office under the law of such State shall update its websites, forms relating to incorporation and physical premises to notify filers of their requirements as reporting companies under this section, including providing an internet link to the reporting company form created by the Secretary under this section. A notification under subparagraph

(A)or

(B)of paragraph

(1)shall explicitly state that the notification is on behalf of the Department of the Treasury for the purpose of supporting a nonpublic registry of business entities in the United States. A corporation or limited liability company formed under the laws of a State may not issue a certificate in bearer form evidencing either a whole or fractional interest in the corporation or limited liability company. It shall be unlawful for any person to affect interstate or foreign commerce by— knowingly providing, or attempting to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph, to FinCEN in accordance with subsection (b); willfully failing to provide complete or updated beneficial ownership information to FinCEN in accordance with subsection (b); knowingly disclosing the contents of any report filed with FinCEN pursuant to subsection (b), except to the extent necessary to fulfill an authorized request for beneficial ownership information; or knowingly using, for an unauthorized purpose, the contents of any report filed with FinCEN pursuant to subsection (b). Any person who violates subparagraph

(A)or

(B)of paragraph

(1)shall be liable to the United States for a civil penalty of not more than $500 for each day that the violation continues or has not been remedied, and the person may be fined not more than $10,000, imprisoned for not more than four years, or both. Any person who violates subparagraph

(C)or

(D)of paragraph

(1)shall be liable to the United States for a civil penalty of not more than $500 for each violation, and the criminal penalties provided for in section 5322 will apply to the same extent as such criminal penalties would apply to a violation described in section 5322. Any person who negligently violates paragraph

(1)shall not be subject to civil or criminal penalties under this paragraph. For purposes of this subsection, a de minimis violation includes any change to the information described in paragraph (2)(B) of subsection

(b)that is due to— a change in an address provided under clause

(iii)of such paragraph (2)(B); or the expiration of an identification document provided under clause

(iv)of such paragraph (2)(B). FinCEN shall provide assistance to, and may not impose any penalty upon, any person seeking to remedy a de minimis violation of paragraph

(1)and come into compliance with this section. The Secretary of the Treasury shall waive the penalty for violating paragraph

(1)if the Secretary determines that the violation was de minimis and the reporting company took reasonable steps to update the information. In determining whether a violation is de minimis, the Secretary of the Treasury may treat repeated violations as 1 violation. In the event of a cybersecurity breach that results in substantial unauthorized access and disclosure of sensitive beneficial ownership information, the Inspector General of the Department of the Treasury shall conduct an investigation into FinCEN cybersecurity practices that, to the extent possible, determines any vulnerabilities within FinCEN privacy security protocols and provides recommendations for fixing such deficiencies. The Inspector General of the Department of the Treasury shall submit to the Secretary of the Treasury a report on the investigation required under this paragraph. Upon receiving a report submitted under subparagraph (B), the Secretary of the Treasury shall— determine whether the Director had any responsibility for the cybersecurity breach or whether policies, practices, or procedures implemented at the direction of the Director led to the cybersecurity breach; and submit to Congress a written report outlining the findings of the Secretary, including a determination by the Secretary on whether to retain or dismiss the individual serving as the Director. The Inspector General of the Department of the Treasury, in coordination with the Secretary of the Treasury, shall provide contact information to receive external comments or complaints regarding the beneficial ownership information collection process. The Inspector General shall submit to Congress a periodic report summarizing external complaints and related investigations by the Inspector General related to the collection of beneficial ownership information. . Title 31, United States Code, is amended— in section 5321(a)— in paragraph (1), by striking sections 5314 and 5315 each place it appears and inserting sections 5314, 5315, and 5334 ; and in paragraph (6), by inserting (except section 5334) after subchapter each place it appears; in section 5322, by striking section 5315 or 5324 each place it appears and inserting section 5315, 5324, or 5334 ; and in the table of contents of chapter 53 of title 31, United States Code, as amended by section 106 of this Act, by adding at the end the following: 5334. Transparent incorporation practices. . To carry out section 5334 of title 31, United States Code, as added by subsection

(a)of this section, during the 3-year period beginning on the date of enactment of this Act, funds shall be made available to FinCEN and the States to pay reasonable costs relating to compliance with the requirements of such section. Funds shall be provided to FinCEN and the States to carry out the purposes described in paragraph

(1)from one or more of the following sources: Upon application by FinCEN or a State, and without further appropriation, the Secretary shall make available to FinCEN or such State 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. Upon application by FinCEN or a State, after consultation with the Secretary, and without further appropriation, the Attorney General of the United States shall make available to FinCEN or such State 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. The Secretary may not make available to FinCEN a total of more than $30,000,000 and to the States a total of not more than $5,000,000 under paragraph (2)(A). The Attorney General of the United States may not make available to FinCEN a total of more than $10,000,000 and to the States a total of not more than $5,000,000 under paragraph (2)(B). 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 who is subject to the requirement to disclose beneficial ownership information under section 5334 of title 31, United States Code, as added by subsection

(a)of this section, 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. Not later than 1 year after the date of the enactment of this Act, the Secretary shall revise the final rule titled Customer Due Diligence Requirements for Financial Institutions (May 11, 2016; 81 Fed. Reg. 29397) to— bring the rule into conformance with this Act and the amendments made by this Act; 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 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.

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