Congress’ passing of the U.S. Corporate Transparency Act (CTA) culminated in a groundbreaking amendment to the Bank Secrecy Act (BSA) via the creation of a national beneficial ownership registry. The United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN) officially announced in September that it would be moving forward with this new database, which will officially launch in January of 2024. This move would subsequently see tens of millions of small U.S. enterprises provide the U.S. government with detailed information on their respective ownership structures. This registry will effectively require corporations, limited liability companies, and similar entities to report certain information about their beneficial owners (the individual, “natural persons” who ultimately own or control these companies), while also requiring appropriate reporting of beneficial ownership with respect to both domestic and foreign entities upon their creation or incorporation. The greater goal of these moves of course being continuing to combat illicit financial activity and the laundering of ill-gotten gains through the use of shell companies.

            The latest rule – the second of three total rulings – now will decide who exactly would be able to use this beneficial ownership information and the ways by which they can access it. While full details have yet to be released, the Treasury is currently proposing the provision of varying levels of access to certain financial institutions attempting to maintain compliance with due diligence requirements. FI’s will reportedly be allowed to request information directly from FinCEN to meet their needs in this regard, but they will also have to seek consent from relevant customers before submitting these requests. Treasury officials will undoubtedly have the highest level of access to the ownership information, with law enforcement and national security agencies also expected to have direct access. However the new measure is not expected to be implemented without opposition. The Wall Street Journal writes that the latest rule is likely to “face scrutiny from industry and special interest groups, some of whom opposed the Corporate Transparency Act”, this as multiple groups “including those representing small-business owners have voiced concerns about the potential for leaks of personal information from the database.”⁴ All told however, the Treasury has stated it plans to maintain heavy controls over the information held in the non-public registry,

            “This rule will make it harder for criminals, organized crime rings, and other illicit actors to hide their identities and launder their money through the financial system,” Treasury Secretary Janet Yellen said in a recent statement regarding the second ruling. “It will help strengthen our national security by making it more difficult for oligarchs, terrorists, and other global threats to use complex legal structures to launder money, traffic humans and drugs, and commit other crimes that threaten harm to the American people,” she said.²

Additional FTX Executives Plead Guilty to Criminal Charges

            As the FTX saga continues to unfold, the walls are closing in around embattled CEO Sam Bankman-Fried (SBF) and his associates. Last week, Global RADAR storied the arrest of SBF in the Bahamas after the United States government brought official criminal charges against him. Over the last week however, two additional top executives of FTX have been implicated in the rampant fraud that ultimately contributed to the once-prominent company’s demise.

            On December 21^st Gary Wang, FTX’s former chief technology officer, and Caroline Ellison, the former chief executive of Alameda Research pleaded guilty to fraud charges similar to those levied against SBF. The U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) also allege that Ellison manipulated the price of FTX’s primary exchange token FTT at the direction of her boss. Damian Williams, U.S. attorney for the Southern District of New York announced both the charges and plea agreements last Wednesday night. Williams also called on others who have either participated in fraudulent activity or have related information with respect to the ongoing case to come forward. “We are moving quickly and our patience is not eternal,” he said, implying that those charged later may not receive such favorable plea deals.³

            SBF appeared in court himself last week, looking less than serious about the proceedings. It is reported that he appeared to making a mockery of the judge and his courtroom, arriving in disheveled casual attire for his initial hearing before falling asleep in the Bahamas courtroom. The disgraced CEO shocked even his own attorney in the Bahamas, when he voluntarily agreed to extradition to the United States against “the strongest possible legal advice.”¹ The extradition was ultimately carried out on Wednesday evening, with Bankman-Fried’s legal counsel working on a bail agreement that would allow him to avoid being held in an American prison.

Citations

1. Barrabi, Thomas. “Sam Bankman-Fried Dozed off, Had to Be ‘Awakened’ during Court Hearing: Report.” New York Post, New York Post, 20 Dec. 2022. 
2. Hussein, Fatima. “Treasury Moves Forward with Corporate Ownership Database.” Daily Business Review, 29 Sept. 2022. 
3. Ramey, Corinne and Michaels, Dave. “Caroline Ellison, Associate of FTX Founder Sam Bankman-Fried, Pleads Guilty to Criminal Charges.” The Wall Street Journal, Dow Jones & Company, 22 Dec. 2022. 
4. Tokar, Dylan. “Treasury Proposal Lays out Who Would Have Access to New Ownership Database.” The Wall Street Journal, Dow Jones & Company, 15 Dec. 2022.