The Financial Crimes Enforcement Network (FinCEN) has published a long-awaited final rule under the Corporate Transparency Act (CTA) pertaining to access to beneficial ownership information (BOI) disclosed to FinCEN. Despite the looming January 1, 2024 effective date, FinCEN has offered some comfort by extending the reporting deadline for firms formed in 2024 to 90 days from the date of formation.
The first proposed access requirements in December 2022 were complicated, and the Final Rule, which spans over 247 pages, retains or even amplifies this complexity.
FinCEN's Efforts to Provide Clarity
FinCEN seeks to offer a high-level understanding of the Final Rule in a concurrently published YouTube video, outlining key deviations from the first proposal. Andrea Gacki, Director of FinCEN, welcomes efforts to resolve issues from financial institutions, notably about their access to BOI. Notably, Gacki states that further laws harmonizing the CTA with the current Customer Due Diligence (CDD) Rule for banks and other financial organizations are still under consideration. Covered financial institutions are required by the CDD Rule to receive BOI from designated entity customers.
FinCEN has added resources to this release, including a news release, fact sheet, statement for banks, and statement for non-bank financial institutions.
Under Secretary Brian Nelson of the United States Treasury Office of Terrorism and Financial Intelligence introduced Director Gacki, emphasizing the importance of BOI under the CTA for law enforcement and national security, with a particular emphasis on its role in tax investigations.
Director Gacki announced the publication of the Final Rule, which was molded by comments from more than 80 stakeholders. Under the CTA, notable developments include an enlarged scope of BOI access for financial institutions (FIs). Previously confined to CDD Rule compliance, FIs can now utilize BOI for broader reasons like as BSA/AML compliance, sanctions screening, Suspicious Activity Report (SAR) filing, and Enhanced Due Diligence (EDD). This modification resolves issues by recognizing the holistic nature of BSA compliance and removing arbitrary disparities in BOI access.
The Final Rule modifies financial institutions access to BOI. To begin, the requirement that FIs restrict BOI access to people based in the United States has been removed. This answers FIs' worries, particularly those with offshore compliance staff. However, if a FI receives a BOI access request from a foreign government, law enforcement organization, or any other person, it must notify FinCEN within three days.
Second, the procedure for gaining access to the BOI database has been simplified. The database is directly accessible and queryable by federal law enforcement. State officials can receive BOI by declaring "court authorization," which is a broader scope than the prior "court order." They no longer need to provide supporting paperwork or wait for FinCEN approval. FIs also receive direct access to BOI, but with less restrictions than government institutions. All parties having BOI access, including FIs, are required to follow the CTA's security and confidentiality regulations, which are normally met by adhering to the Gramm-Leach-Bliley Act and other duties. This simplified solution intends to alleviate concerns regarding administrative complexity and potential impediment to the CTA's objectives caused by a one-at-a-time BOI access mechanism.
Director Gacki stressed that the Final Rule has no effect on the CDD Rule, and that future rules integrating the CTA with the CDD Rule are being developed. The CDD Rule will be revised by FinCEN to provide financial institutions access to BOI for Anti-Money Laundering (AML), counter-terrorism funding (CTF), and CDD compliance. The goal is to reduce needless constraints on financial institutions and legal organizations.
Phased Implementation Starting January 1, 2024
The BOI database will be gradually implemented beginning January 1, 2024. A pilot program will initially grant access to key federal agencies, followed by phases involving US Treasury personnel, federal law enforcement and national security agencies, additional federal agencies, intelligence agencies, state and local law enforcement, intermediary agencies for foreign requests, and, finally, FIs and their regulators.
Director Gacki further stated that FinCEN will publish the relevant paperwork for BOI access in the Federal Register. FinCEN remains dedicated to providing information and engaging with CTA stakeholders.
