Proposed Rule2023-19815
Privacy Act of 1974; Proposed Rule Exempting a System of Records From Certain Provisions of the Privacy Act of 1974
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Published
September 14, 2023
Issuing agencies
Treasury Department
Abstract
In accordance with the requirements of the Privacy Act of 1974, as amended, FinCEN gives notice of a proposed amendment to exempt a new system of records, entitled "FinCEN .004--Beneficial Ownership Information System," from certain provisions of the Privacy Act. The Beneficial Ownership Information (BOI) System is being established to implement the beneficial ownership information reporting and access requirements set out in the Corporate Transparency Act (CTA), which was enacted on January 1, 2021, as part of the Anti-Money Laundering Act of 2020. The exemptions are intended to increase the value of the system for law enforcement purposes and to comply with the CTA's prohibitions against unauthorized disclosure of certain information. Public comments are invited.
Full Text
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<title>Federal Register, Volume 88 Issue 177 (Thursday, September 14, 2023)</title>
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[Federal Register Volume 88, Number 177 (Thursday, September 14, 2023)]
[Proposed Rules]
[Pages 63039-63042]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-19815]
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DEPARTMENT OF THE TREASURY
Office of the Secretary
31 CFR Part 1
RIN: 1506-AB63
Privacy Act of 1974; Proposed Rule Exempting a System of Records
From Certain Provisions of the Privacy Act of 1974
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Notice of proposed rulemaking (NPRM).
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SUMMARY: In accordance with the requirements of the Privacy Act of
1974, as amended, FinCEN gives notice of a proposed amendment to exempt
a new system of records, entitled ``FinCEN .004--Beneficial Ownership
Information System,'' from certain provisions of the Privacy Act. The
Beneficial Ownership Information (BOI) System is being established to
implement the beneficial ownership information reporting and access
requirements set out in the Corporate Transparency Act (CTA), which was
enacted on January 1, 2021, as part of the Anti-Money Laundering Act of
2020. The exemptions are intended to increase the value of the system
for law enforcement purposes and to comply with the CTA's prohibitions
against unauthorized disclosure of certain information. Public comments
are invited.
DATES: Comments on this document must be received by October 16, 2023.
ADDRESSES: Written comments on this document may be submitted
electronically through the Federal Government eRulemaking portal at
<a href="https://www.regulations.gov">https://www.regulations.gov</a>. Electronic submission of comments allows
the commenter maximum time to prepare and submit a comment, ensures
timely receipt, and enables the Department of the Treasury (Treasury)
to make the comments available to the public. Please note that comments
submitted through <a href="https://www.regulations.gov">https://www.regulations.gov</a> will be public and can be
viewed by members of the public.
In general, Treasury will post all comments to <a href="https://www.regulations.gov">https://www.regulations.gov</a> without change, including any business or personal
information provided, such as names, addresses, email addresses, or
telephone numbers. All comments received, including attachments and
other supporting material, will be part of the public record and
subject to public disclosure. You should submit only information that
you wish to make publicly available.
FOR FURTHER INFORMATION CONTACT: For questions about this document and
privacy issues, contact: Deputy Assistant Secretary for Privacy,
Transparency, and Records at U.S. Department of the Treasury, 1500
Pennsylvania Avenue NW, Washington, DC 20220; telephone: (202) 622-
5710.
SUPPLEMENTARY INFORMATION:
Background
In a separate notice published on September 14, 2023, FinCEN is
proposing to establish a system of records for information that the
bureau will collect pursuant to the CTA, which was enacted into law as
part of the Anti-Money Laundering Act of 2020.\1\ The CTA requires
``reporting companies''--certain corporations, limited liability
companies, and other entities created in or registered to do business
in the United States--to report to FinCEN identifying information
associated with the entities themselves, their beneficial owners, and
their company applicants (together, beneficial ownership information or
BOI). The CTA establishes that beneficial ownership information (BOI)
is ``sensitive information'' and imposes strict confidentiality and
security restrictions on the storage, access, and use of that
information.\2\
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\1\ The CTA is Title LXIV of the William M. (Mac) Thornberry
National Defense Authorization Act for Fiscal Year 2021, Public Law
116-283 (Jan. 1, 2021) (the NDAA). Division F of the NDAA is the
Anti-Money Laundering Act of 2020 (AML Act), which includes the CTA.
\2\ See CTA, section 6402(6), (7).
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On September 30, 2022, FinCEN issued the final rule establishing
BOI reporting requirements (the Reporting Rule).\3\ The Reporting Rule
requires reporting companies to report BOI to FinCEN. Reporting
companies will provide this information to FinCEN by submitting a
Beneficial Ownership Information Report (BOIR). An initial BOIR must
include the following BOI about the reporting company's beneficial
owners and company applicants (if the reporting company is required to
report company applicant information): full legal name; date of birth;
complete current address; and unique identifying number and issuing
jurisdiction from an acceptable non-expired identification document
(i.e., a passport issued by the U.S. government, a document issued by a
State,\4\ local
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government, or Indian tribe for the purposes of identifying the
individual, a driver's license issued by a State, or a passport issued
by a foreign government if the individual does not possess any of the
other documents described). Additionally, an image of the
identification document must be included in the BOIR. Reporting
companies must file an updated BOIR to reflect any changes to required
information previously submitted to FinCEN.
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\3\ FinCEN, Beneficial Ownership Information Reporting
Requirements, 87 FR 59498 (Sept. 30, 2022), available at <a href="https://www.federalregister.gov/documents/2022/09/30/2022-21020/beneficial-ownership-information-reporting-requirements">https://www.federalregister.gov/documents/2022/09/30/2022-21020/beneficial-ownership-information-reporting-requirements</a>.
\4\ The term ``State'' means any State of the United States, the
District of Columbia, or any commonwealth, territory, or possession
of the United States. See 31 U.S.C. 5336(a)(12).
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An individual or a reporting company may obtain a FinCEN identifier
(FinCEN ID) by providing certain information to FinCEN. A FinCEN ID is
unique to each such individual or reporting company. The FinCEN ID
associated with an individual can be used in lieu of the information
required to be reported about that individual. An individual may
request and obtain a FinCEN ID by submitting an application containing
the information described above in connection with a reporting
company's beneficial owner or company applicant. Information provided
to FinCEN to obtain a FinCEN ID will be disclosed to authorized
recipients for authorized purposes--in the same way and to the same
extent as BOI. The effective date of the Reporting Rule is January 1,
2024.
In addition to imposing reporting requirements, the CTA also
authorizes FinCEN to disclose BOI to five categories of authorized
recipients, subject to strict security, confidentiality, and use
protocols. Those categories include foreign and domestic law
enforcement agencies, but do not include disclosures to beneficial
owners, company applicants, or individuals who have obtained FinCEN
IDs.
To collect, maintain, and provide access to BOI, FinCEN is
developing the Beneficial Ownership Information System (the BOI
System). The CTA dictates that the BOI System should be ``highly
useful'' to its authorized users, including law enforcement
agencies.\5\ Indeed, the information to be collected by FinCEN is
intended to assist law enforcement in: anti-money laundering, tax, and
other financial investigations; advance counterterrorism, counter-
proliferation, and broader national security and intelligence
interests; help prevent evasion of financial sanctions; and facilitate
tax compliance.
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\5\ See CTA, section 6402(8)(C).
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Privacy Act
The Privacy Act contains certain requirements regarding the
maintenance and disclosure of a system of records. Those requirements
may differ from, or conflict with, the comprehensive requirements for
maintaining and disclosing BOI specified in the CTA. For example, while
the Privacy Act provides for access to records by certain individuals
upon request, the CTA prohibits disclosure of BOI except as authorized
in five enumerated categories, none of which include disclosure to such
individuals under the Privacy Act.\6\ The CTA, therefore, expressly
prohibits certain disclosures that would otherwise be required under
the more general provisions of the Privacy Act. In this and any other
case where the CTA conflicts with the Privacy Act, FinCEN believes that
the more detailed, specific provisions of the CTA supersede any
contrary provisions in the Privacy Act. Nevertheless, to the extent
certain provisions of the Privacy Act were to apply, and without
conceding that they do, FinCEN is publishing this proposed rule
pursuant to 5 U.S.C. 552(j) and (k), to exempt FinCEN .004--Beneficial
Ownership Information System from those provisions.
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\6\ Compare 5 U.S.C. 552a(d) with CTA, section 6402(c)(2).
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Under 5 U.S.C. 552a(j)(2), the head of a Federal agency may
promulgate rules to exempt a system of records from certain provisions
of 5 U.S.C. 552a if the system of records is ``maintained by an agency
or component thereof which performs as its principal function any
activity pertaining to the enforcement of criminal laws, including
police efforts to prevent, control, or reduce crime or to apprehend
criminals, and the activities of prosecutors, courts, correctional,
probation, pardon or parole authorities, and which consists of (A)
information compiled for the purpose of identifying individual criminal
offenders and alleged offenders and consisting only of identifying data
and notations of arrests, the nature and disposition of criminal
charges, sentencing, confinement, release, and parole and probation
status; (B) information compiled for the purpose of a criminal
investigation, including reports of informants and investigators, and
associated with an identifiable individual; or (C) reports identifiable
to an individual compiled at any stage of the process of enforcement of
the criminal laws from arrest or indictment through release from
supervision.''
Under 5 U.S.C. 552a(k)(2), the head of a Federal agency may
promulgate rules to exempt a system of records from certain provisions
of 5 U.S.C. 552a if the system of records is ``investigatory material
compiled for law enforcement purposes, other than material within the
scope of subsection (j)(2) of this section.''
FinCEN is hereby giving notice of a proposed rule to exempt the BOI
System from certain provisions of the Privacy Act pursuant to 5 U.S.C.
552a(j)(2) and (k)(2) and the authority vested in the Secretary of the
Treasury by 31 CFR 1.23(c). The reasons for exempting the system of
records from sections (c)(3), (c)(4), (d)(1), (d)(2), (d)(3), (d)(4),
(e)(1), (e)(2), (e)(4)(G), (e)(4)(H), (e)(5), (e)(8), (f) and (g) of
the Privacy Act are as follows:
(1) 5 U.S.C. 552a(d)(1), (e)(4)(H) and (f)(2), (f)(3) and (f)(5)
grant individuals access to records containing information about them.
An exemption from these provisions is appropriate because the CTA
prohibits FinCEN from disclosing BOI except to five categories of
authorized recipients; \7\ these categories do not include beneficial
owners, company applicants, or individuals who have obtained FinCEN
IDs. Because individuals who are the subject of the records in the BOI
System are not included in any of those categories, the application of
5 U.S.C. 552a(d)(1), (e)(4)(H) and (f)(2), (f)(3) and (f)(5) to the BOI
System would contravene the CTA's disclosure restrictions.
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\7\ 31 U.S.C. 5337(c)(2).
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(2) 5 U.S.C. 552a(e)(4)(G) and (f)(1) enable individuals to inquire
whether a system of records contains records about them. An exemption
from these provisions is appropriate because allowing individuals
involved in illegal activity to learn that FinCEN has information
concerning those individuals that could lead to them being identified
for investigation could undercut the CTA mandate that the BOI System be
``highly useful'' to law enforcement agencies. For instance, such
notice could prompt individuals engaged in illegal activity to: (a)
take steps to avoid detection; (b) begin, continue, or resume illegal
conduct upon learning that they are not identified in the system of
records; or (c) destroy evidence needed to prove the violation.
(3) 5 U.S.C. 552a(d)(2), (d)(3) and (d)(4), (e)(4)(H) and (f)(4)
permit individuals to request amendment of a record pertaining to them
and require the agency either to amend the record or note the disputed
portion of the record and, if the agency refuses to amend the record,
to provide a copy of the individual's statement of disagreement with
the agency's refusal, to persons or other agencies to whom the record
is thereafter disclosed. Because these provisions depend on individuals
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having access to their records, and since this rule proposes to exempt
the BOI System from the provisions of 5 U.S.C. 552a relating to access
to records for the reasons set forth above, these provisions would not
apply to the BOI System. Furthermore, an exemption from this
requirement is appropriate because allowing individuals to amend
certain records that pertain to them would conflict with the mechanism
for reporting and updating beneficial ownership information provided
for in the CTA.
(4) 5 U.S.C. 552a(c)(4) requires an agency to inform any person or
other agency about any correction or notation of dispute that the
agency made in accordance with 5 U.S.C. 552a(d) to any record that the
agency disclosed to the person or agency, if an accounting of the
disclosure was made. Because this provision depends on individuals
having access to and an opportunity to request amendment of records
pertaining to them, and because this rule proposes to exempt the BOI
System from the provisions of 5 U.S.C. 552a relating to access to and
amendment of records for the reasons set forth above, this provision
would not apply to the BOI System.
(5) 5 U.S.C. 552a(c)(3) requires an agency to make any accounting
of disclosures of records required by 5 U.S.C. 552a(c)(1) available to
the individual named in the record upon his or her request. Any such
accounting must state the date, nature, and purpose of each disclosure
of the record and the name and address of the recipient. Applying this
provision would impair the effective use of information collected in
the BOI System. Making an accounting of disclosures available to the
subject of an investigation would alert them that another agency is
investigating their criminal activities and could reveal the geographic
location of the other agency's investigation, the nature and purpose of
that investigation, and the dates on which that investigation was
active. Violators possessing such knowledge would be able to take
measures to avoid detection or apprehension by: (a) altering their
operations; (b) transferring their criminal activities to other
geographical areas, legal entities, or ostensible beneficial owners; or
(c) destroying or concealing evidence that would form the basis for
arrest. Moreover, providing an accounting to the subjects of
investigations would alert them to the fact that FinCEN has information
relevant to their suspected criminal activities. Access to such
information, together with other available information, could reveal
the operation of the information-gathering and analysis systems of
FinCEN and other BOI System users, and permit violators to take steps
to avoid detection or apprehension.
(6) 5 U.S.C. 552a(e)(1) requires an agency to maintain in its
records only such information about an individual as is relevant and
necessary to accomplish a purpose of the agency required to be
accomplished by statute or executive order. Maintenance of information,
as defined in 5 U.S.C. 552a(a)(3), includes the collection and
dissemination of information. An exemption from this provision is
therefore appropriate because its application would require FinCEN to
make determinations at the time of collection about the relevance and
necessity of collected information. Speculative determinations about
the relevance and necessity of collected information could negatively
impact the quality of information available to law enforcement in
future investigations, which would undermine the mandate in the CTA
that the BOI System be ``highly useful'' to law enforcement.
(7) 5 U.S.C. 552a(e)(2) requires an agency to collect information
to the greatest extent practicable directly from the subject individual
when the information may result in adverse determinations about an
individual's rights, benefits, and privileges under Federal programs.
To the extent information in the BOI System might result in such an
adverse determination, applying this provision would contravene the
requirement in the CTA that FinCEN collect BOI from reporting
companies.
(8) 5 U.S.C. 552a(e)(5) requires an agency to maintain all records
it uses in making any determination about any individual with such
accuracy, relevance, timeliness, and completeness as is reasonably
necessary to assure fairness to the individual in the determination.
Because 5 U.S.C. 552a(a)(3) defines ``maintain'' as including
``collect'' and ``disseminate,'' applying this provision to the BOI
System would hinder timely dissemination of BOI, and by extension
hinder law enforcement efforts dependent upon such information.
Information in the BOI System is filed by reporting companies and
individual FinCEN ID applicants, and it is not possible at the time of
collection to determine whether the information in such records is
accurate, relevant, timely, and complete.
(9) 5 U.S.C. 552a(e)(8) requires an agency to make reasonable
efforts to serve notice on an individual when the agency makes any
record on the individual available to any person under compulsory legal
process when such process becomes a matter of public record. Exemption
from this requirement is appropriate because applying the requirement
to the BOI System could reveal to the subject of a law enforcement
investigation or action that a law enforcement agency used BOI in the
investigation or action, thereby revealing the agency's investigative
techniques and procedures.
(10) 5 U.S.C. 552a(g) provides an individual with civil remedies
when: (a) an agency wrongfully refuses to amend a record or to review a
request for amendment; (b) an agency wrongfully refuses to grant access
to a record; (c) any determination relating to an individual is based
on records that are not accurate, relevant, timely and complete; and
(d) an agency fails to comply with any other provision of 5 U.S.C. 552a
so as to adversely affect the individual. The BOI System should be
exempted from this provision to the extent that the civil remedies
relate to the provisions of 5 U.S.C. 552a from which the prior
paragraphs of this section exempt the BOI System. There should be no
civil remedies for failure to comply with provisions from which this
system of records is exempted. Exemption from this provision will also
protect FinCEN from baseless civil court actions that might hamper its
ability to collate, analyze and disseminate data.
Any information from a system of records for which an exemption is
claimed under 5 U.S.C. 552a(j)(2) or (k)(2) which is also included in
another system of records retains the same exempt status such
information has in the system of records for which such exemption is
claimed.
Regulatory Analysis
This proposed rule is not a ``significant regulatory action'' under
Executive Order 12866.
Pursuant to the requirements of the Regulatory Flexibility Act
(RFA), 5 U.S.C. 601 et seq., it is hereby certified that this proposed
rule will not have a significant economic impact on a substantial
number of small entities. The proposed regulation, issued under
sections (j)(2) and (k)(2) of the Privacy Act, is to exempt certain
information maintained by Treasury in the above-referenced systems of
records from certain provisions of the Privacy Act. Small entities, as
defined in the RFA, are not provided rights under the Privacy Act and
are outside the scope of this regulation.
In accordance with the provisions of the Paperwork Reduction Act of
1995, 44 U.S.C. 3501 et seq., FinCEN has determined that this proposed
rule will
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not impose new record keeping, reporting, or other types of information
collection requirements.
Lists of Subjects in 31 CFR Part 1
Privacy.
For the reasons stated in the preamble, part 1 of title 31 of the
Code of Federal Regulations is proposed to be amended as follows:
PART 1--DISCLOSURE OF RECORDS
0
1. The authority citation for part 1 continues to read as follows:
Authority: 5 U.S.C. 301, 552, 552a, 553; 31 U.S.C. 301, 321; 31
U.S.C. 3717.
0
2. Amend Sec. 1.36 by adding, in alphanumeric order, an entry for
``FinCEN .004'' in table 7 to paragraph (c)(1)(vii) and table 17 to
paragraph (g)(1)(ix) to read as follows:
Sec. 1.36 Systems exempt in whole or in part from provisions of the
Privacy Act and this part.
* * * * *
(c) * * *
(1) * * *
(vii) * * *
Table 7 to Paragraph (c)(1)(vii)
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No. Name of system
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FinCEN .004................ Beneficial Ownership Information System
(not exempt from 5 U.S.C. 552a(e)(3) and 5
U.S.C. 552a(e)(4)(I)).
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* * * * *
(g) * * *
(1) * * *
(ix) * * *
Table 17 to Paragraph (g)(1)(ix)
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No. Name of system
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* * * * * * *
FinCEN .004................ Beneficial Ownership Information System
(not exempt from 5 U.S.C. 552a(e)(3) and 5
U.S.C. 552a(e)(4)(I)).
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Ryan Law,
Deputy Assistant Secretary Privacy, Transparency, and Records, U.S.
Department of the Treasury.
[FR Doc. 2023-19815 Filed 9-13-23; 8:45 am]
BILLING CODE 4810-02-P
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