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FinCEN Issues Final Rule Establishing Beneficial Ownership Information RequirementsRead Time: 2 mins
On September 29, 2022, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule that establishes a beneficial ownership information (BOI) reporting requirement that will require reporting companies to report information about their respective beneficial owners to FinCEN, effective January 1, 2024. This reporting requirement will be in addition to the current state level requirements for submission of entity formation information.
Generally, the businesses subject to the BOI reporting requirement will include most corporations, limited liability companies, and other entities created in or registered to do business in the United States. A defined “reporting company” will be required to file its BOI report with FinCEN to identify itself and its beneficial owners (including entities and individuals) who exercise “substantial control” over the reporting company, or who own or control at least twenty-five percent “ownership interest” of the company. “Reporting companies” that are created or registered before January 1, 2024, will have one year—until January 1, 2025—to file their initial reports, while reporting companies created or registered after January 1, 2024, will have thirty days after receiving notice of their creation or registration to file their initial reports. Reporting companies will also have thirty days to report any changes in reporting information.
However, certain entities engaged in various financial services activities (including but not limited to: securities issuers, investment advisers, broker dealers, banks and their holding companies, credit unions, money transmitters, and insurance companies) that are already subject to ownership reporting and oversight by other federal and/or state agencies are specifically excluded from these additional reporting requirements. Also excluded from the definition of a “reporting company” is any entity with a U.S. operating presence that employs more than twenty employees on a full-time basis in the United States and that has filed a U.S. federal tax return in the previous year demonstrating more than $5,000,000 in gross receipts or sales in the aggregate.
The adoption and implementation of the final rule is important for both domestic prevention of financial crime and international consensus in moving toward transparency. Domestically, the final rule was designed to enhance the strength and transparency of the U.S. financial system in order to deter and prevent criminal actors from utilizing shell companies to launder money or hide assets.
In concert with publishing the final rule, FinCEN also published a fact sheet. It appears that it will also publish guidance aimed to assist reporting companies in complying with the final rule and to establish guidelines as to who will have access to reported data, although it is expected that access to the reported information will ultimately be available to law enforcement, the intelligence community, regulators, and financial institutions.
Reprinted with permission from the American Bar Association’s Business Law Today October Month-In-Brief: Business Regulation & Regulated Industries.