Rule2023-25681
Privacy Act of 1974; Exemptions
Primary source
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Published
November 22, 2023
Effective
January 1, 2024
Issuing agencies
Treasury Department
Abstract
In accordance with the requirements of the Privacy Act of 1974, as amended, Treasury is issuing a final rule, exempting 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.
Full Text
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<title>Federal Register, Volume 88 Issue 224 (Wednesday, November 22, 2023)</title>
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[Federal Register Volume 88, Number 224 (Wednesday, November 22, 2023)]
[Rules and Regulations]
[Pages 81345-81348]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25681]
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DEPARTMENT OF THE TREASURY
Office of the Secretary
31 CFR Part 1
RIN 1506-AB63
Privacy Act of 1974; Exemptions
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Final rule.
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SUMMARY: In accordance with the requirements of the Privacy Act of
1974, as amended, Treasury is issuing a final rule, exempting 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.
DATES: This rule is effective January 1, 2024.
FOR FURTHER INFORMATION CONTACT: For questions about this document and
privacy issues, contact: Ryan Law, 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
On September 14, 2023, Treasury published a notice of proposed
rulemaking (the ``NPRM'') in the Federal Register, 88 FR 63039,
proposing to exempt a system of records, FinCEN .004--Beneficial
Ownership Information System (the ``BOI System''), from provisions of
the Privacy Act. Pursuant to the CTA, starting on January 1, 2024,
FinCEN will use the BOI System to maintain BOI submitted to FinCEN by
certain corporations, limited liability companies, and other entities
created in or registered to do business in the United States
(``reporting companies''). BOI includes identifying information
associated with the reporting companies themselves, their beneficial
owners, and their company applicants. The BOI System will also maintain
information about individuals who apply to FinCEN for FinCEN
identifiers, which beneficial owners and company applicants will be
able to use in lieu of the information required to be reported about
them by reporting companies.\1\ Information provided to FinCEN to
obtain a FinCEN identifier will be disclosed to authorized recipients
for authorized purposes in the same way and to the same extent as BOI.
The CTA authorizes FinCEN to disclose BOI to five categories of
authorized recipients that include foreign and domestic law enforcement
agencies, but do not include beneficial owners, company applicants, or
individuals who have obtained FinCEN identifiers.
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\1\ Reporting companies will not use the FinCEN identifier
application to request a FinCEN identifier but instead will request
a FinCEN identifier when they submit a BOI report.
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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. In any 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, Treasury is publishing this final rule pursuant to 5 U.S.C.
552a(j) and (k), to exempt the BOI System from those provisions.
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 that 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.''
The reasons for exempting the BOI System 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; \2\ these categories do not include beneficial
owners, company applicants, or individuals who have obtained FinCEN
identifiers. 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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\2\ 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)
[[Page 81346]]
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
having access to their records, and since this rule exempts 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 do 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
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 exempts 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 does not apply
to the BOI System.
(5) 5 U.S.C. 552a(c)(3) requires an agency to make the accounting
of any 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. The
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 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.
If such a program exists, an exemption to this provision is appropriate
because applying it to the BOI System 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 identifier 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 is exempt 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. Exemption from this provision is
appropriate because there should be no civil remedies for failure to
comply with provisions from which the BOI System is exempt. 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.
Public Comments
Treasury received two comments on the NPRM. The first expressed
support for the proposed rule, noting its ``import[ance] for protecting
an individual's privacy, while also increasing the value of the [BOI
System] for law enforcement purposes.''
The second addresses the proposal to exempt the BOI System from the
requirements of 5 U.S.C. 552a(c)(3) and
[[Page 81347]]
suggests a potential alternative approach. As explained above, that
provision of the Privacy Act requires an agency to make the accounting
of any 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. The
comment's author argues that fully exempting the BOI System from these
requirements ``would make the [] audit trail required by the CTA
meaningless'' and that ``[a]llowing for an accounting of disclosures to
be made to the public would help ensure that the right to privacy would
not be violated through unauthorized disclosures.'' The commenter
suggests that the BOI System should be only partially exempt from 5
U.S.C. 552a(c)(3) and that FinCEN should establish procedures under 5
U.S.C. 552a(f)(2) that would make accountings of disclosures available
to requesters after some specified amount of time has passed (the
commenter proposes one year).
FinCEN carefully considered this comment, particularly the
commenter's claim that exempting the BOI System from the requirements
of 5 U.S.C. 552a(c)(3) would make the system's audit trails
meaningless. FinCEN interpreted this comment as asserting that BOI
System audit trails would constitute ``accountings of disclosures''
that would only be meaningful if individuals about whom the system
contains records have access to them. However, FinCEN disagrees with
this view.
In its ``Sense of Congress,'' the CTA directs the Secretary of the
Treasury to ``take all steps, including regular auditing, to ensure
that government authorities accessing beneficial ownership information
do so only for authorized purposes consistent with [the CTA] . . . .''
\3\ Accordingly, FinCEN will use the BOI System's audit trails to
identify potential instances of improper access to BOI by authorized
system users. The audit trails will also support other aspects of the
CTA compliance and enforcement regime, including the imposition of
penalties, which will further help to ensure that BOI is accessed and
used appropriately.
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\3\ CTA, section 6402(7)(B).
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Separately, for the reasons set out in the NPRM and reiterated
above regarding the potential adverse impact on law enforcement
investigations, Treasury declines to adopt the suggestion to make
accountings of disclosures available to requesters after a specified
period of time. Law enforcement investigations may span years and share
common individuals of interest with concurrent investigations of
equally varying durations. Revealing information about BOI disclosures
to the subjects of those disclosures--even after a seemingly lengthy
delay--could put those activities at risk of disruption and jeopardize
the effective use of the BOI System for law enforcement purposes.
Furthermore, a delay in making an accounting of disclosures available
would not address the concern that such access could reveal information
about the operation of the information-gathering and analysis systems
utilized by FinCEN and other BOI System users. The resulting effect
would be to postpone, rather than prevent, foreseeable harms to the law
enforcement activities that Congress intended the BOI System to
support. Such a result would contradict the purpose of the CTA and,
therefore, Treasury will adopt the rule as proposed.
Regulatory Analysis
This rule is not a ``significant regulatory action'' under
Executive Order 12866, as amended.
Pursuant to the requirements of the Regulatory Flexibility Act
(RFA), 5 U.S.C. 601 et seq., it is hereby certified that this rule will
not have a significant economic impact on a substantial number of small
entities. The rule, issued under sections (j)(2) and (k)(2) of the
Privacy Act, exempts 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 rule will
not impose new recordkeeping, 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 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.
552 a(e)(3) and 5 U.S.C.
552a(e)(4)(I)).
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* * * * *
(g) * * *
(1) * * *
(ix) * * *
[[Page 81348]]
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. 2023-25681 Filed 11-21-23; 8:45 am]
BILLING CODE 4810-02-P
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</html>Indexed from Federal Register on November 22, 2023.
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