/>iFinCEN’s beneficial ownership reporting rule takes effect on January 1, 2024. This rule requires certain entities to file with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (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 regulation implements the Corporate Transparency Act (CTA).[1] FinCEN has recently released a flurry of materials relating to the CTA and the beneficial ownership reporting rule, including a compliance guide for small businesses, a notice of proposed rulemaking to extend the deadline for certain reporting companies to file their initial beneficial ownership information, and comment requests.
Compliance Resources
In September 2023, FinCEN published the Small Entity Compliance Guide, which is intended to assist businesses with complying with the beneficial ownership reporting requirements. The Guide includes helpful information, such as the definition of “beneficial owner” under the reporting rule, the specific information that entities must report, and the process for filing a report. For example, the Guide breaks down the 23 specific types of entities that are exempt from the reporting requirement. It also provides examples of “substantial control” indicators, as reporting companies must identify all individuals who exercise “substantial control” over a company (in addition to all individuals who own or control not less than 25 percent of the ownership interests of the entity). Regarding the technical logistics of filing reports, the Guide notes that FinCEN’s filing system is still under development and will not be available until January 1, 2024, and that FinCEN will publish instructions and other technical guidance on how to complete the report form.
In addition to the Small Entity Compliance Guide, FinCEN has also released other compliance resources, including a pamphlet on beneficial ownership information reporting, and has been rolling out multiple FAQs relating to the reporting rule. Additionally, FinCEN plans to establish a contact center to field questions about beneficial ownership reporting requirements.[2]
Notice of Proposed Rulemaking to Extend Deadline for Certain Reporting Companies
On September 28, 2023, FinCEN published a notice of proposed rulemaking that would amend the beneficial ownership information reporting rule to extend the filing deadline for certain reports.[3] Under the current final rule – which takes effect January 1, 2024 – entities created or registered on or after the rule’s effective date of January 1, 2024, must file initial reports with FinCEN within 30 days of notice of their creation or registration.[4] The proposed rule would extend that filing deadline from 30 days to 90 days for entities created or registered on or after January 1, 2024, and before January 1, 2025. (Entities created or registered on or after January 1, 2025, would have 30 days to file their reports.)
Following publication of the final rule, FinCEN continued to engage with partners in the private sector and concluded that extending the deadline for certain companies would have multiple benefits. First, the extension would increase the time available for certain entities to understand and comply with their new regulatory obligations. While FinCEN has been publishing guidance (as described above) and conducting outreach, it acknowledged the “novelty” of the reporting rule and the fact that many of the filers will never have interacted before with FinCEN. Second, the extension would provide reporting companies with additional time to obtain the necessary information and resolve questions that may arise in the process of completing their initial reports. Written comments on the proposed rule must be submitted on or before October 30, 2023.
Comment Requests
On September 29, 2023, FinCEN published two requests for comments. The first relates to an information collection request to the Office of Management and Budget (OMB) regarding the individual FinCEN identifier.[5] The CTA allows FinCEN to issue unique identifying numbers, or “FinCEN identifiers.”[6] In certain instances, beneficial owners, company applicants, and reporting companies may provide a FinCEN identifier to a reporting company in lieu of providing required beneficial ownership information.[7] FinCEN notes that the primary reasons for individual beneficial owners to apply for a FinCEN identifier include data security and administrative efficiency, and estimates that the number of individuals that will apply for a FinCEN identifier “will likely be relatively low” – approximately 1 percent of the estimated number of reporting companies expected to report beneficial ownership information.
The second request relates to the actual form for the beneficial ownership information reports.[8] FinCEN reviewed comments received in response to a previous notice that proposed the form for public comment, and “commenters were uniformly critical of the checkboxes that would allow a reporting company to indicate if certain information about a beneficial owner or company applicant is ‘unknown,’ or if the reporting company is unable to identify information about a beneficial owner or company applicant.” In response to such comments, FinCEN is pursuing a revised approach to the form that will not contain such checkboxes. Comments for both requests must be received on or before October 30, 2023.
[1] The National Defense Authorization Act for Fiscal Year 2021 (NDAA), which became law on January 1, 2021, included significant reforms to the U.S. anti-money laundering and countering the financing of terrorism regime. Division F of the NDAA consists of the Anti-Money Laundering Act of 2020, which includes the CTA.
[2] Beneficial Ownership Information Reporting Deadline Extension for Reporting Companies Created or Registered in 2024, 88 Fed. Reg. 66,730 at 66,731 (Sept. 28, 2023).
[3] Beneficial Ownership Information Reporting Deadline Extension for Reporting Companies Created or Registered in 2024, 88 Fed. Reg. 66,730 (Sept. 28, 2023).
[4] The current final rule reads as follows: “(i) Any domestic reporting company created on or after January 1, 2024 shall file a report within 30 calendar days of the earlier of the date on which it receives actual notice that its creation has become effective or the date on which a secretary of state or similar office first provides public notice, such as through a publicly accessible registry, that the domestic reporting company has been created. (ii) Any entity that becomes a foreign reporting company on or after January 1, 2024 shall file a report within 30 calendar days of the earlier of the date on which it receives actual notice that it has been registered to do business or the date on which a secretary of state or similar office first provides public. notice, such as through a publicly accessible registry, that the foreign reporting company has been registered to do business.” Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59,498, 59,591 (Sept. 30, 2022).
[5] Agency Information Collection Activities; Submission for OMB Review; Comment Request; Individual FinCEN Identifier Application, 88 Fed. Reg. 67,449 (Sept. 29, 2023).
[6] See 31 U.S.C. § 5336.
[7] Individuals are not required to obtain FinCEN identifiers.
[8] Agency Information Collection Activities; Submission for OMB Review; Comment Request; Beneficial Ownership Information Reports, 88 Fed. Reg. 67,443 (Sept. 29, 2023).
