Title page

Contents

Highlights 2

Letter 5

Background 8

Types of Legal Entities and Legal Arrangements 9

FinCEN and the Beneficial Ownership Reporting Rule 11

Role of the Financial Action Task Force 13

States Require Most Types of Partnerships to Register and Provide Some Ownership Information 15

Registration for General Partnerships, but Most States Do So for Other Types of Partnerships 15

States Commonly Request Information on General Partners but Usually Do Not Specify the Beneficial Owners of Domestic Partnerships 17

Foreign and Out-of-State Partnerships Have Limited Reporting and Registration Requirements 20

Differences in State Laws Affect Which Partnerships Must Report Beneficial Ownership Information to FinCEN 22

States Generally Require Only Certain Types of Trusts to Register and Provide Ownership Information 24

States Do Not Require Common Law Trusts, Which Generally Are Used for Estate Planning, to Register 24

Some States Require Common Law Trusts Created to Hold Assets for Business Purposes to Register 24

Few States Recognize Statutory Business Trusts 25

Some States Request Information on Trustees but Not about the Beneficial Owners of Domestic Business Trusts 26

States Require Some Ownership Information for Foreign and Out-of-State Business Trusts 28

Treatment of Domestic Business Trusts as Reporting Companies May Vary Depending on State Laws Governing Their Creation 30

Law Enforcement Reports That Beneficial Ownership Information Aids Investigations, but Faces Challenges Obtaining It for Trusts 30

Use of Trusts and Partnerships for Illicit Finance Has Appeared to Be Low but May Pose Future Risks 33

Use of Trusts and Partnerships in Illicit Finance in United States Has Appeared to Be Lower Than for Corporations and LLCs 33

Trusts and Partnerships Generally Appeared to Pose a Greater Risk for Illicit Finance Abroad Than in the United States 39

Treasury Could Enhance Its Monitoring of Illicit Activities Involving Trusts and Partnerships 42

Conclusions 44

Recommendation for Executive Action 45

Agency Comments and Our Evaluation 45

Appendix I: Objectives, Scope, and Methodology 48

Appendix II: Comments from the Department of the Treasury 52

Appendix III: GAO Contact and Staff Acknowledgments 55

Figure 1. Business Entities and Trusts Registered in the United States as of January 1, 2024 11

Figure 2. Summary of Beneficial Ownership Registries in Selected Countries, as of September 2023 14

Figure 3. Ownership and Other Information States Require from Domestic Partnerships at Initial Filing 18

Figure 4. Ownership and Other Information States Require from Domestic Partnerships for Periodic Filings 19

Figure 5. Ownership and Other Information States Require from Foreign and Out-of-State Partnerships for Initial Filings 20

Figure 6. States in Which Unregistered Foreign and Out-of-State Partnerships Can Engage in Certain Financial Activities 21

Figure 7. Ownership and Other Information Required for Initial Filings by States That Register Domestic Business Trusts 26

Figure 8. Ownership and Other Information Required for Periodic Filings by States That Register Domestic Business Trusts 27

Figure 9. Information States Require from Foreign and Out-of-State Business Trusts for Initial Filings 28

Figure 10. States in Which Unregistered Foreign and Out-of-State Business Trusts Can Engage in Certain Financial Activities 29

Figure 11. Types of Entities Named in Suspicious Activity Reports Submitted to the Financial Crimes Enforcement Network, 2019-2023 37

Figure 12. Types of Entities Named in Law Enforcement Investigations, by Selected Agency, 2019-2023 38

Figure 13. Risks of Money Laundering and Terrorist Financing Posed by Trusts and Partnerships in Selected Countries 40