Lawmakers Introduce Legislation to Reform FinCEN and Protect Small Business Data

In today’s fast-paced world, financial crimes are becoming increasingly common, and it’s crucial to safeguard consumers and businesses. 

Lawmakers are moving to reform the Financial Crimes Enforcement Network (FinCEN) and protect small business data. 

The House Financial Services Committee Chairman Patrick McHenry (R-North Carolina) on Monday (June 12) introduced two pieces of legislation to bring transparency and accountability to FinCEN. The Accountability Through Confirmation Act and the Protecting Small Business Information Act aims to set up accountability practices for FinCEN and safeguard small businesses’ sensitive information and Americans’ privacy.

“The degree of regulatory authority and volume of Americans’ sensitive information amassed by FinCEN would make the Intelligence Community blush,” McHenry said in a statement. He added, “I am introducing two bills to boost transparency at FinCEN and ensure it is accountable to the American people. I’m proud to stand with my colleagues to fight back against government overreach and protect the privacy of our constituents.”

The Protecting Small Business Information Act is particularly important, as it will delay the effective date for the upcoming beneficial ownership information (BOI) reporting requirements until FinCEN finalizes both the Access Rule and the CDD Congruence Rule. This will ensure that small businesses have the time to comply with the reporting requirements without being burdened by an overly complicated compliance regime. House members have expressed concerns about the rollout of the reporting requirements, stating in a letter, “We believe that press releases are insufficient to ensure that the approximately 32.6 million small businesses that will be expected to comply in 2024 understand their upcoming responsibilities.”

But financial crimes aren’t the only threat we face. Online payment fraud is also on the rise, with cumulative global merchant losses expected to exceed $343 billion between 2023 and 2027. 

To combat this, merchants need to work closely with their payment providers to enhance security and meet changing customer preferences. According to Doriel Abrahams, head of risk in the U.S. at fraud prevention provider Forter, “fraudsters, as a general rule of thumb, tend to be very sophisticated and are always finding new ways to defraud individuals and businesses.” Abrahams also noted that “the weakest link in the online payment journey is the human link.”

Fraud can also come from within a company, as demonstrated by a recent case in which a procurement manager in New York pled guilty to defrauding his own company. Invoice fraud is a common problem that can cost middle-market businesses an average of $280,000 per year. To combat this, firms need to pinpoint vulnerabilities and strengthen security, including implementing authentication and enterprise-level digital identity verification.

Despite these efforts, there are concerns that small businesses may still be held liable for noncompliance with FinCEN’s forthcoming beneficial ownership reporting requirements. Lawmakers are calling on FinCEN to provide a clear plan for engagement and education to ensure that small businesses are aware of their reporting responsibilities.