Centralised Beneficial Ownership Proposal Has Multiple Payoffs

As Transparency International pointed out in its recent ‘G20 Leaders or Laggards?’ report, the US is lagging behind the curve of its G20 peers in beneficial ownership transparency. Many of the G20 nations go some way to supporting anti-money laundering efforts with beneficial ownership data, for example in the UK we have a database held by Companies House. The Transparency International report specifically examines whether the US Senate’s Counter Terrorism and Illicit Finance Act (CTIFA) addresses identified deficiencies in beneficial ownership transparency to support anti-money laundering efforts.

In fact, the establishment of a central US Department of the Treasury/FinCEN national beneficial ownership database is one of the most significant changes proposed in CITFA. Creating an US nationwide consolidated database, whether through FinCEN or through a consortium of interested financial services and data providers, has the potential to solve multiple challenges with a single solution.

The creation of a FinCEN national database is a gargantuan task for the US Treasury Department to manage.

A centralised database would help prevent money laundering and terrorist financing, not just in the US, but worldwide with many international companies working with those in the states. This has been an ongoing, widespread problem – and it’s not just the US that’s been behind. Most countries are making little or no progress in ending corruption, according to Transparency International in its 2017 Corruption Perceptions Index, published in February. More than two-thirds of countries scored below 50 (where zero is highly corrupt and 100 is very clean).


The CTIFA bill, which was introduced in the US Senate in January 2018, is described as a significant overhaul of the US Bank Secrecy Act (BSA) – which places requirements on financial institutions to establish anti-money-laundering programs – and is widely supported by Republican and Democrat groups alike, as well as by leading US financial services companies and lobbying groups. The American Bankers Association, the Clearing House, the Institute of International Bankers, and the National Association of Federally-Insured Credit Unions are among its proponents.

Many benefits to national database

In addition to the obvious benefit of effectively combatting fraud, one of the key virtues of an US national database would be the elimination of redundant and inconsistent data collection among businesses and the financial institutions that they bank with. The burden of complying with the requirements of the CDD Final Rule for both US banks and small- to mid-sized businesses is lessened as well. American businesses would report to FinCEN once rather than reporting to multiple banks.

Standardised and centralised collection and maintenance of beneficial-owner records would allow banks (both in the US and globally) to gain efficiencies through disambiguation of US business entities and their owners, allowing them to repurpose resources into higher value activities within the BSA or local Anti-Money Laundering (AML) statutory frameworks. Through efficiency gains, banks and other regulated entities can reinvest in innovation, something that has been lacking due to the cost of compliance.

A unified and trusted data source would help the US federal government and law enforcement agencies as well, by simplifying their investigations into alleged money laundering, organised crime, multinational drug cartels, terrorist financing, and international tax evasion within the 50 states. It would also enable effective auditing, investigation and monitoring practices around additional laws and regulations, such as the Foreign Account Tax Compliance Act (FATCA) and the Office of Foreign Assets Control (OFAC) 50% Rule.

Such a centralised database would allow the US to increase transparency and move towards helping to drive out the opaqueness specific to its federal and state systems. Given the important role the states have in regulating commerce and registering businesses, this would go a long way toward helping to provide more transparency, and benefit industry worldwide.

Validating the beneficial ownership data

Of course, the creation of a FinCEN national database is a gargantuan task for the US Treasury Department to manage. FinCEN is not a data- or technology-centric organisation, and it’s unclear whether it will pursue outside resources to supplement its data.

Data collection requires a robust system, well-designed processes, and a process to validate that the information collected is accurate. A large percentage of businesses’ representatives lack knowledge of their ultimate beneficial owners, and those seeking to hide beneficial ownership have the means and knowledge to do so.

One way to meet that challenge is by obtaining third-party beneficial ownership data to pre-populate fields with independent information. That data provider should be able to give access to the entity family structure for immediate look up. That access would also help businesses speed up the filing process.

Once initial data is collected, FinCEN will need the appropriate data management and maintenance expertise to validate, reconcile, and monitor inevitable changes in that data over time.

This proposed beneficial ownership database should also be created in a way that enables interoperability with other data sources beyond the US. The ability to link a US-run beneficial ownership database, combined with other countries’ lists would enable users to capture the most comprehensive, global information.

For these reasons, I am advocating for a public–private partnership, in which we would endorse the passage of the bill and the creation of a national database. Dun & Bradstreet would seek to assist FinCEN and the financial services industry in the creation and maintenance of a centralised repository, which would increase transparency around beneficial ownership in the US.

Learn more about Dun & Bradstreet’s Beneficial Ownership capabilities.

Learn More