FINCEN Publishes Final Rule on Beneficial Ownership Requirements

Beginning on January 1, 2024, the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury, began accepting reports about the “beneficial ownership” of companies doing business in the United States. Generally, these requirements apply to corporations, limited liability companies or other business entities which file documents with a secretary of state or similar office in any state or with an Indian tribe.

This repository, referred to as the “BOSS,” or the “Beneficial Ownership Secure System,” aims to unveil privately held corporations, limited liability companies, and similar entities. The objective is to ensure that these entities are not channeling resources to individuals or entities under U.S. government sanctions an increasingly critical concern in today’s world.

FinCEN published the first of three expected final rules on September 30, 2022. This Final Rule addresses beneficial ownership reporting requirements, providing clarity on which entities must report BOI and the definition of beneficial ownership.

Key Amendments and Clarifications in the Final Rule:

1. Reporting Companies Definition
   • Domestic Reporting Company: Broadly includes domestic corporations, limited liability companies, and similar entities formed by filing documents with the state or tribal jurisdiction.
   • Foreign Reporting Company: Encompasses foreign entities registered to conduct business in the U.S.
2. Exemptions
   • FinCEN retains the twenty-three specifically enumerated exempted entities, such as depository institution holding companies, public companies, and investment advisers.
   • Notable exemptions include pooled investment vehicles and large operating companies.
3. Reporting Requirements
   • Reporting companies must provide comprehensive details on names, addresses, jurisdiction of formation, and company identification numbers.
   • Beneficial owners and company applicants require information such as names, dates of birth, addresses, and unique identification numbers from acceptable identification documents.
4. Security and Access
   • FinCEN will implement stringent security protocols to safeguard BOI, ensuring its use only for authorized purposes.
5. Filling Deadlines
   • Reporting companies formed before January 1, 2024 have until January 1, 2025, to file.
   • Reporting companies formed on or after January 1, 2024, must file BOI reports within 90 days of formation.
   • Reporting companies formed on or after January 1, 2025, must file BOI reports within 30 days of formation.
6. Beneficial Ownership Definition
   • A beneficial owner is an individual with substantial control or owning/controlling, directly or indirectly, at least 25% ownership interests.
   • Control indicators include senior officer roles, authority over appointments/removals, and influence over key decisions.
7. Next Steps
   • FinCEN will publish two more rules on access to the BOSS and revisions to the 2016 Customer Due Diligence Rule.
   • Entities should assess exemptions and begin preparations for reporting requirements.

Williams Kilpatrick, PLLC is well-equipped to guide you through these evolving regulatory landscapes. Our legal team can help your entity understand the nuances, comply with reporting obligations, and ensure a smooth transition toward enhanced transparency. Contact us today to discuss how we can assist your business in navigating these critical changes.

For more detailed information, refer to the full version of the Final Rule.