Tens of millions of small U.S. companies will be required to provide the government with details on their owners and others who benefit from them under a finalized regulation that's intended to peel back the layers of ownership that can hide unlawfully obtained assets.

The Treasury Department said it was moving to create a database that will contain personal information on the owners of at least 32 million U.S. businesses as part of an effort to combat illicit finance. Treasury officials said the new rule represents a sea change in the world of corporate transparency.

The regulation comes in the midst of U.S. and Western allies' ongoing attempts to sanction Russian oligarchs and wealthy friends of Russian President Vladimir Putin since the start of his invasion of Ukraine. The wealthy Russians are accused of hiding stolen money and assets in the U.S. and around the world.

"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 statement.

"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.

The rule will require most American businesses with fewer than 20 employees to register with the government as of Jan. 1, 2024. Treasury officials said the regulatory burden will be small, costing about $85 per business, but will offer massive benefits to law enforcement. Small businesses are targeted because shell companies, often used to hide illegally obtained assets, tend to have few employees.

The rule requires reporting companies to disclose information on the people who own, control or create firms, including the name, birthdate, address and a unique identification number from driver's licenses or passports as well as images of the documents.

The database will be available only to law enforcement and government agencies.

Ian Gary, the executive director of the FACT Coalition, a nonprofit that promotes corporate transparency, called the release of the new rule "a historic moment in the decadeslong fight to rid the U.S. of dirty money."

"The U.S. has fallen behind many jurisdictions in requiring the true owners of corporate and other entities to be disclosed," Gary said.

Gary said there is more work to be done to fully implement the rule.

Treasury said it will pursue subsequent rulemakings that will address access to the database and other enhancements to the new regulation.

The National Federation of Independent Businesses in February raised privacy concerns about the rule, saying that the Financial Crimes Enforcement Network, which is tasked with creating the database, must provide the same safeguards for the information that apply to other U.S. intelligence agencies.

The regulation implements the reporting provisions of the Corporate Transparency Act, which was enacted as part of the National Defense Authorization Act for fiscal 2021.

Brian North, a business law attorney at Buchanan Ingersoll Rooney in Philadelphia, said the biggest impact of the database will be its use as a tool for helping law enforcement.

"If an entity was being used to avoid sanctions," for example, he said, "the database would be used to provide information to the government to assist in its enforcement."

Fatima Hussein reports for the Associated Press.

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