FinCEN Issues Final Rule Establishing Beneficial Ownership Information Requirements – Financial Services

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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 provide information about their respective beneficial owners. to FinCEN, starting January 1. , 2024. This reporting requirement will be in addition to current state-level requirements for submitting entity formation information.

Generally, businesses subject to the BOI reporting requirement will include most corporations, LLCs, and other entities formed 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” of the business. “Reporting companies” created or registered before January 1, 2024 will have one year, i.e. 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 notification of their creation or registration to file their initial reports. Reporting companies will also have thirty days to report any changes to the information provided.

However, certain entities engaged in various financial services activities (including, but not limited to: issuers of securities, investment advisers, brokers, banks and their holding companies, credit unions, money transfer companies 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 an operational presence in the United States that employs more than twenty full-time employees in the United States and that filed a U.S. federal income tax return during the year. previous year showing more than $5,000,000 in total gross revenue or sales.

The adoption and implementation of the final rule is important both for the national prevention of financial crime and for the international consensus in favor of transparency. Domestically, the final rule was designed to enhance the soundness and transparency of the US financial system to deter and prevent criminal actors from using shell companies to launder money or hide assets.

Along with the release of the final rule, FinCEN also released a fact sheet. It appears that it will also issue guidance to help reporting companies comply with the final rule and establish guidelines as to who will have access to reported data, although it is expected that access to information declared will eventually be available to law enforcement. , the intelligence community, regulators and financial institutions.

Reproduced with permission from the American Bar Association’s
Business Law Today Month of October in Brief: Business Regulation and Regulated Industries.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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