On September 30, 2022, FinCEN issued a final rule establishing a beneficial ownership information reporting requirement, pursuant to the bipartisan Corporate Transparency Act (CTA). This rule will require certain entities to file with FinCEN reports that identify two categories of individuals: the beneficial owners of the entity, and individuals who have filed an application with specified governmental authorities to create the entity or register it to do business. The requirements in the final rule are intended to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity, while minimizing the burden on entities doing business in the United States.
From Acting FinCEN Director Himamauli Das’ statement:
“For too long, it has been far too easy for criminals, Russian oligarchs, and other bad actors to fund their illicit activity by hiding and moving money through anonymous shell companies and other corporate structures right here in the United States. This final rule is a significant step forward in our efforts to support national security, intelligence, and law enforcement agencies in their work to curb illicit activities. The final rule will also play an important role in protecting American taxpayers and businesses who play by the rules, but are repeatedly hurt by criminals that use companies for illegal reasons.”
According to FinCEN, the reporting rule is one of three rulemakings planned to implement the CTA. FinCEN will engage in additional rulemakings to: (1) 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; and (2) revise FinCEN’s customer due diligence rule. FinCEN is also working on developing the infrastructure to administer the said requirements, including the information technology system.
The final rule on beneficial ownership information reporting requirements will be effective on January 1, 2024. Reporting companies created or registered before January 1, 2024, will have until January 1, 2025 to file their initial reports. Reporting companies created or registered after January 1, 2024 will have 30 days after creation or registration to file their initial reports. Once the initial report has been filed, both existing and new reporting companies will have to file updates within 30 days of a change in their beneficial ownership information.
FinCEN’s press release can be found here.
The final rule on Beneficial Ownership Information Reporting Requirements can be found here.