The Treasury Department has released a final rule regarding when and how entities should use FinCEN (Financial Crimes Enforcement Network) identifiers for reporting beneficial ownership information (BOI) of certain related entities (see Note). An identifier is a unique identifying number that FinCEN will issue to individuals who have provided FinCEN with their BOI and to "reporting companies" that have filed initial BOI reports. The final rule is effective as of 1 January 2024.
Beneficial ownership reporting requirements initially were enacted as part of the Corporate Transparency Act (CTA) of 2021 and final rules were delegated for development to FinCEN.
The newly adopted rule requires certain corporations, limited liability companies, and other similar entities (i.e. "reporting companies") to report certain identifying information about the beneficial owners who own or control such entities and the company applicants who form or register them.
Specifically, the final rule clarifies that a reporting company may report another entity's FinCEN identifier and full legal name in lieu of the full list of information required under 31 CFR 1010.380(b)(1) with respect to the beneficial owners of the reporting company, but only if the following three conditions are met:
- the entity has obtained a FinCEN identifier and provided that FinCEN identifier to the reporting company;
- an individual is or may be a beneficial owner of the reporting company by virtue of an interest in the reporting company that the individual holds through the entity; and
- the beneficial owners of the entity and of the reporting company are the same individuals.
These requirements are intended to facilitate access to BOI for certain authorized recipients for the purposes of countering money laundering and the financing of terrorism, and for other specific purposes. The new rule was revised before being finalized to take into account concerns that commentators raised. The changes are to:(1) consistently refer to the entity whose FinCEN identifier the reporting company may use as "another entity" or "the other entity" rather than simply "the entity," in order to avoid confusion with the reporting company itself; and (2) make clear that it is an individual's ownership interest in another entity that allows the reporting company to report the other entity's FinCEN identifier in lieu of the individual's information.
Note: The Treasury established the FinCEN in 1990 to provide a government-wide multisource financial intelligence and analysis network. While it does not directly collect taxes like the IRS, FinCEN plays a crucial role in safeguarding the financial system from illicit use, combating money laundering, and promoting national security by receiving and maintaining financial transactions data, analysing and disseminating that data for law enforcement purposes, and building global cooperation with counterpart organizations in other countries and with international bodies.