Senate May Consider Provision To Expand Businesses Reporting Requirements

As the S-Corp Association reported last week, the U.S. Senate could soon consider legislation that threatens the privacy and security of millions of businesses and would impose costly new reporting requirements on them.

The bill, called Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act, would dramatically expand Corporate Transparency Act (CTA) reporting requirements with which business owners and their employees must comply.

U.S. House lawmakers already have approved the ENABLERS Act as a rider on the annual National Defense Authorization Act (NDAA) and the U.S. Senate could consider the legislation this fall. As Bloomberg, explained, the House bill would require “professional service providers who serve as key gatekeepers to the U.S. financial system [to] adopt anti-money laundering procedures that can help detect and prevent the laundering of corrupt and other criminal funds into the United States.”

Gatekeepers would be defined broadly as any person (except government workers) who provides a corporate or legal entity with formation, trust, third-party payment, or legal or accounting services involving certain financial activities. The bill text itself makes clear that, if enacted, the rules would apply to any person involved in:

• The formation or registration of a corporation, limited liability company, trust, foundation, limited liability partnership, partnership, or other similar entity;
• The acquisition or disposition of an interest in a corporation, limited liability company, trust, foundation, limited liability partnership, partnership, or other similar entity;
• Providing a registered office, address or accommodation, correspondence or administrative address for a corporation, limited liability company, trust, foundation, limited liability partnership, partnership, or other similar entity;
• Acting as, or arranging for another person to act as, a nominee shareholder for another person;
• The managing, advising, or consulting with respect to money or other assets;
• The processing of payments;
• The provision of cash vault services;
• The wiring of money;
• The exchange of foreign currency, digital currency, or digital assets; or
• Sourcing, pooling, organization, or management of capital in association with the formation, operation, or management of, or investment in, a corporation, limited liability company, trust, foundation, limited liability partnership, partnership, or other similar entity.

These individuals would be required to collect and report beneficial ownership information, report any suspicious transactions, and establish anti-money laundering policies.

In terms of enforcement, covered individuals would be subject to U.S. Department Treasury audits initially and then additional enforcement activities after a year. Currently, the related Corporate Transparency Act imposes fines up to $10,000 and jail time up to two years for failing to make the appropriate reports.

Millions of business owners will be forced to comply with these new reporting requirements if the Senate acts and President Joe Biden signs the legislation into law.