GAO Examines Treasury Safeguards for Corporate Ownership Data Access

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has taken initial steps to implement safeguards for granting access to beneficial ownership information, as required under the Corporate Transparency Act. This effort aims to prevent illicit financial activities by ensuring law enforcement and regulatory agencies can access ownership details of corporate entities while maintaining strict confidentiality measures. The Government Accountability Office (GAO) has released its first of seven annual reports assessing FinCEN’s compliance with the act’s requirements for securing this data.

The Corporate Transparency Act, enacted in 2021, mandates that certain legal entities report their beneficial ownership information to FinCEN to combat financial crimes involving shell companies. In December 2023, FinCEN finalized a rule outlining security measures for authorized agencies accessing this data. In early 2024, the agency launched a phased rollout of access, beginning with six federal agencies in a pilot program. These agencies had to sign memoranda of understanding (MOUs) detailing safeguarding procedures, submit reports on compliance measures, and certify adherence to data protection rules. As of October 2024, four of the six agencies had completed these steps and gained access to the system.

Following the pilot, FinCEN expanded access to approximately 200 additional federal agencies starting in September 2024. The agency revised its MOU template based on pilot feedback to clarify compliance expectations, including record-keeping, training requirements, and annual audits. FinCEN also developed a standardized procedure for reviewing agency access requests to ensure compliance with the Corporate Transparency Act. Future phases of the rollout, scheduled through spring 2025, will extend access to state, local, and tribal law enforcement, financial institutions, and federal agencies serving as intermediaries for foreign government requests.

To oversee compliance, FinCEN has established multiple monitoring mechanisms, including annual audits, data access logs, and periodic agency reports. Agency coordinators must promptly report any security breaches, and FinCEN plans to track user activity within the system. While these safeguards are in place, FinCEN continues to develop policies for its oversight responsibilities. GAO will continue its annual evaluations to assess whether FinCEN is effectively securing access to corporate ownership data while ensuring its appropriate use in law enforcement and financial crime prevention efforts.

The Corporate Transparency Act continues to be the subject of ongoing legal battles, and the new deadline for filing has been extended to March 21, 2025.

Article by multiple RFHC contributors.

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