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Beneficial Ownership Information Reporting Requirements rule (2022)

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The Beneficial Ownership Information Reporting Requirements is a significant rule issued by the Financial Crimes Enforcement Network (FinCEN), effective January 1, 2024, that establishes reporting requirements for beneficial ownership.[1]

HIGHLIGHTS
  • Name: Beneficial Ownership Information Reporting Requirements
  • Agency: Financial Crimes Enforcement Network
  • Action: Final rule
  • Type of significant rule: Economically significant rule

    • Timeline

    The following timeline details key rulemaking activity:

    • January 1, 2024: The final rule took effect.[1]
    • August 30, 2022: The Financial Crimes Enforcement Network (FinCEN) published the final rule.[1]

    Background

    The Corporate Transparency Act (CTA), enacted in 2021 as part of the National Defense Authorization Act for Fiscal Year 2021 (NDAA), requires companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This law is intended to combat money laundering, tax fraud, and other illicit activities by increasing transparency in entity ownership structures.[1]

    Summary of the rule

    The following is a summary of the rule from the rule's entry in the Federal Register:

    “ FinCEN is issuing a final rule requiring certain entities to file with FinCEN reports that identify two categories of individuals: the beneficial owners of the entity, and individuals who have filed an application with specified governmental authorities to create the entity or register it to do business. These regulations implement Section 6403 of the Corporate Transparency Act (CTA), enacted into law as part of the National Defense Authorization Act for Fiscal Year 2021 (NDAA), and describe who must file a report, what information must be provided, and when a report is due. These requirements are intended to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity, while minimizing the burden on entities doing business in the United States.[2] ”

    Summary of provisions

    The following is a summary of the provisions from the rule's entry in the Federal Register:[1]

    “ The Department's continued work to fight corruption includes implementing the Corporate Transparency Act (CTA), which was enacted as part of the Anti-Money Laundering Act of 2020 in the National Defense Authorization Act for Fiscal Year 2021.[14] In December 2021, building on an earlier Advance Notice of Proposed Rulemaking (ANPRM), FinCEN published a Notice of Proposed Rulemaking (NPRM) [15] to give the public an opportunity to review and comment on a proposed rule implementing the CTA's provisions requiring entities to report information about their beneficial owners and the individuals who created the entity (together, beneficial ownership information or BOI). FinCEN explained that the proposed rule would help protect the U.S. financial system from illicit use by making it more difficult for bad actors to conceal their financial activities through entities with opaque ownership structures. FinCEN also explained that the proposed reporting obligations would provide essential information to law enforcement and others to help prevent corrupt actors, terrorists, and proliferators from hiding money or other property in the United States.


    U.S. efforts to collect BOI will lend U.S. support to the growing international consensus to enhance beneficial ownership transparency, and will spur similar efforts by foreign jurisdictions. At least 30 countries have already implemented some form of central register of beneficial ownership information, and more than 100 countries, including the United States, have committed to implementing beneficial ownership transparency reforms.[2]

    		”

    Significant impact

    See also: Significant regulatory action

    Executive Order 12866, issued by President Bill Clinton (D) in 1993, directed the Office of Management and Budget (OMB) to determine which agency rules qualify as significant rules and thus are subject to OMB review.

    Significant rules have had or might have a large impact on the economy, environment, public health, or state or local governments. These actions may also conflict with other rules or presidential priorities. Executive Order 12866 further defined an economically significant rule as a significant rule with an associated economic impact of $100 million or more. Executive Order 14094, issued by President Joe Biden (D) on April 6, 2023, made changes to Executive Order 12866, including referring to economically significant rules as section 3(f)(1) significant rules and raising the monetary threshold for economic significance to $200 million or more.[1]


    The text of the Beneficial Ownership Information Reporting Requirements rule states that OMB deemed this rule economically significant under E.O. 12866:

    “ It has been determined that this regulation is a 'significant regulatory action' and economically significant as defined in section 3(f) of Executive Order 12866. Pursuant to the Regulatory Flexibility Act, FinCEN's analysis concluded that the rule will have a significant economic impact on a substantial number of small entities.[2] ”

    Text of the rule

    The full text of the rule is available below:[1]

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 Federal Register, "Beneficial Ownership Information Reporting Requirements," August 30, 2022
    2. ↑ 2.0 2.1 2.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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