At long last, the Financial Crimes Enforcement Network (“FinCEN”) issued a final rule establishing a beneficial ownership information reporting requirement for corporations and companies both large and small. In its announcement earlier today, FinCEN explained that the rule will require most companies and corporations registered to do business in the United States to report information about their beneficial owners to FinCEN.
By providing beneficial ownership information on the persons who exercise substantial control over a reporting company, or own or control at least 25 percent of the ownership interest, the rule will enhance transparency and assist financial institutions and the U.S. government in efforts to identify illicit finance and expose criminal actors.
Notably, FinCEN will engage in additional rulemakings to implement the Corporate Transparency Act. In addition to the reporting rule, FinCEN will “establish rules for who may access beneficial ownership information, for what purposes, and what safeguards will be required to ensure that the information is secured and protected.” Further, FinCEN intends to revise the Customer Due Diligence rule to align it with the new rule, which likely means it will be expanded to cover the broader scope that the new rule encompasses, among other changes.
While these additional rulemakings and revisions are still in the works, it will be interesting to see whether financial institutions will be permitted to access the beneficial ownership information that reporting companies provide to FinCEN. Allowing financial institutions to access this information would help streamline account opening and reduce the possibility of inconsistent recordkeeping between FinCEN’s and private institutions’ records.
The new beneficial ownership information reporting requirement is effective January 1, 2024, and reporting companies created or registered before the rule takes effect will have one year to file their initial reports. Reporting companies created or registered after the rule takes effect will have 30 days to file their initial reports.
For more information, including important definitions under the rule, the types of reporting companies identified by the rule, and the specific pieces of information reporting companies will be required to provide about each of its beneficial owners, see the Beneficial Ownership Information Reporting Rule Fact Sheet.