FinCEN Publishes Notice and Proposed Rule Related to CTA Beneficial Ownership Information System

Why it matters: Information gathered and maintained by FinCEN under the CTA will be exempt from notification and record access requirements, and individuals will not be permitted to contest the contents of a report if, for example, they believe that inaccurate information about them has been provided by a reporting company.

FinCEN has released a notice and proposed rule under the Privacy Act of 1974 (Privacy Act) in connection with FinCEN’s establishment of the Beneficial Ownership Information (BOI) System related to the implementation of the Corporate Transparency Act (CTA). Notably, the notice states that information maintained in the BOI System is exempt from notification requirements, record access requirements, and requirements that an individual be permitted to contest its contents, pursuant to exemptions from the Privacy Act relating to systems of records maintained for certain law enforcement purposes. The proposed rule would formalize the exemptions.

For more about the BOI reporting requirements, see FinCEN Finalizes Rule Implementing Beneficial Ownership Reporting Requirements Under the Corporate Transparency Act.

The Privacy Act, a federal law that governs the collection, maintenance, use, and dissemination of information about individuals that is maintained in a system of records by a federal agency, generally prohibits disclosure of a record about an individual from a system of records without the individual’s consent unless an exception applies, including an exception for “routine use” of the information. The Privacy Act also allows an individual to request notification if a system of records maintained by a government agency contains a record of information about the person, and to access and request amendment of the record, again – subject to certain exemptions.

The CTA expressly prohibits certain disclosures to individuals that would otherwise be required under the Privacy Act. Although FinCEN states in the commentary to the proposed rule release it believes that where the CTA conflicts with the Privacy Act, the more detailed, specific provisions of the CTA apply, the proposed rule will expressly exempt information maintained on the BOI System from these requirements of the Privacy Act. Comments are due within 30 days of publication in the Federal Register.

FinCEN’s notice sets forth certain routine uses for which beneficial ownership information concerning individuals may be used, including authorized disclosure permitted by the CTA, to the Department of Justice in certain circumstances in connection with obtaining legal representation or legal advice in a proceeding involving Treasury, an employee of Treasury, or the United States; to other agencies or third parties to confirm or remediate a data breach; to student volunteers and other individuals not having the status of agency employees to the extent access is required to enable such persons to perform services for FinCEN as authorized by law; and to the National Archives and Records Administration, to the extent permitted by law.