The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) recently published its long-awaited final rule setting out new landmark US beneficial ownership information (BOI) reporting requirements.

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Once the new rule becomes effective, over 30 million legal entities created or operating in the US will be required to report BOI to a centralized government database.

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For compliance leaders, new policies, procedures, and controls will need to be put in place to ensure their organization can comply with this rule.

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The US’s lack of federal BOI reporting requirements has been described by the Financial Action Task Force (FATF) as a “serious deficiency” in the US AML regime. But with this rule, the US will be equipped to “more effectively combat financial crime,” according to Treasury Secretary Yellen.

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Key Dates

• January 1, 2024: The rule becomes effective and entities created or registered after this date have 30 days to file their BOI reports.
• January 1, 2025: Entities created or registered before January 1, 2024 have until January 1, 2025 to file initial BOI reports.

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The rule’s implementation dates will be dependent on FinCEN funding, and may be adjusted.

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Who Will Have to Report?

“Reporting entities” required to report BOI information include:

• US entities created by filing a document with a secretary of state or similar office under the law of a state or Indian tribe (which does not apply to many sole proprietorships, certain types of trusts, and general partnerships); or
• Non-US entities registered to do business within the US by the filing of a document with a secretary of state or similar office under the law of a state or Indian tribe.

However, the rule also exempts 23 entity types from BOI reporting requirements.

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Notable exemptions include:

• Publicly traded companies;
• Banks and bank holding companies;
• FinCEN-registered money services businesses;
• Various SEC or CFTC-registered entities
• Operating companies with over 20 full-time employees, annual gross receipts or sales over $5 million, and an operating presence at a physical office in the United States.

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What BOI Must Be Reported?

Reporting companies will be required to report BOI information that covers:

• Beneficial owners - this includes all individuals who, directly or indirectly, exercise “substantial control” over a reporting company, or own or control at least 25% of the ownership interests.
• Company applicants - this includes the individual who directly files the document creating or registering a reporting company, and the individual primarily responsible for directing or controlling such filing.
• The reporting company - this includes name, address, jurisdiction of formation and/or registration, and tax identification number.

Individuals and reporting companies will also be able to get a unique FinCEN identifier number. This number can be given to and used by other reporting companies as a substitute for providing the required BOI information to FinCEN.

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Next Steps for Companies

Companies will only be penalized for willful violations of the rule, rather than inadvertent errors while acting diligently and in good faith.

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But with just over a year before the rule becomes effective, compliance leaders need to act now to ensure their organization will be compliant with these new reporting requirements, including taking the following steps:

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First, determine if any entities in your organization are not “reporting companies” required to report BOI information or qualify for one of the 23 specific exemptions.

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Second, develop policies and procedures to:

• Identify if new entities are required to report BOI to FinCEN
• Confirm entities’ reporting/non-reporting status
• Collect BOI for all reporting companies
• File BOI reports timely
• Confirm information reported to FinCEN
• Update or correct information reported to FinCEN within applicable time periods

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Finally, keep watch for:

• Two further rules to be issued by FinCEN on (1) access to and disclosure of BOI and (2) revisions to the 2018 CDD rule’s beneficial ownership provisions
• Anticipated FinCEN guidance, forms, and instructions regarding this rule and the other forthcoming rules

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To learn more about how Cable provides Automated Assurance of your financial crime controls, get in touch with us here.