WASHINGTON–U.S.-based companies and individuals will no longer have to report beneficial ownership information (BOI) to Treasury’s Financial Crimes Enforcement Network (FinCEN) following an interim final rule poised that is set to take effect today—but it will be “business as usual” for financial institutions, according to one attorney.
The interim final rule is being issued with a 60-day comment period.
The BOI data has been collected under the Corporate Transparency Act (CTA) as part of an effort to improve FinCEN’s efforts to enforce Bank Secrecy Act (BSA) reporting of suspicious monetary transactions as law enforcement seeks to follow transactions at U.S. financial institutions that could be part of illegal activities. that may be related to activities like illegal money laundering and funding of terrorism.
What Revision Means
According to the interim final rule, for purposes of BOI reporting the definition of “reporting company” has been revised to mean only those entities that are formed under the “law of a foreign country and that have registered to do business in any U.S. state or tribal jurisdiction by the filing of a document with a secretary of state or similar office.”
FinCEN said it also exempts entities previously known as “domestic reporting companies” from BOI reporting requirements.
FinCEN further stated that all entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN.
Meanwhile, foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, FinCEN said.
CU Attorney Offers View
In a posting on LinkedIn, Brandy Bruyere, a regulatory compliance attorney-consumer financial services and credit unions and a partner at Honigman, LLP, said that amending the reporting rule to exempt domestic companies from the requirement to file beneficial ownership information with the government may have some financial institutions wondering what this means for the other components of the CTA.
“FinCEN was separately working on the “access rule” which would have outlined how FIs could use the beneficial ownership database as part of customer due diligence including collecting beneficial ownership information (BOI) when opening accounts,” Bruyere said in the post. “With only foreign companies subject to the rule’s requirements, the database will not be usable for this purpose.
“FinCEN indicates in Friday’s rule that things will remain business as usual for financial institutions.”
Statement Cited
Bruyere pointed to the FinCEN statement, “For example, the continuing requirement for covered financial institutions to collect a legal entity customer’s BOI at the time of account opening will serve to mitigate certain illicit finance risks associated with exempting domestic reporting companies from reporting their BOI.”
Wrote Bruyere, “In other words, one justification for exempting domestic entities from the CTA is that financial institutions will keep doing this work when opening accounts. Of course, many entities are formed that never engage a financial institution for services, but for now FinCEN, in consultation with the Department of Homeland Security and the U.S. Attorney General, view this as sufficient.”