FinCEN's Beneficial Ownership Information Report Rule: What You Need to Know

Introduction

The Financial Crimes Enforcement Network (FinCEN) recently implemented a new rule known as the Beneficial Ownership Interest Rule. This rule aims to enhance transparency and prevent money laundering and illicit activities by requiring financial institutions to collect and verify information about the beneficial owners of legal entity customers.

What is the Beneficial Ownership Rule?

The Beneficial Ownership Rule is a regulation issued by FinCEN under the Bank Secrecy Act (BSA). It requires covered financial institutions, such as banks, credit unions, and broker-dealers, to identify and verify the beneficial owners of legal entity customers at the time of account opening.

Beneficial owners are individuals who directly or indirectly own 25% or more of the equity interests in a legal entity customer, as well as individuals who have significant control over the entity.

Why was the Rule Implemented?

The Beneficial Ownership Rule was implemented to combat money laundering, terrorist financing, and other illicit financial activities. By identifying the individuals who ultimately own or control legal entity customers, financial institutions can better assess the risks associated with their customers and detect suspicious transactions.

What Information is Required?

Under the Beneficial Ownership Rule, financial institutions must collect and verify the following information about the beneficial owners:

• Full legal name
• Date of birth
• Residential address
• Social Security number or passport number

Financial institutions may also need to obtain supporting documentation, such as driver's licenses or passports, to verify the information provided.

How Does the Rule Affect Businesses?

The Beneficial Ownership Rule primarily affects legal entity customers, including corporations, limited liability companies (LLCs), partnerships, and trusts. These entities are now required to disclose their beneficial owners when opening accounts with covered financial institutions.

Businesses should ensure they have accurate and up-to-date information about their beneficial owners to comply with the rule. Failure to comply may result in penalties and reputational damage.

What are the Benefits of the Rule?

The implementation of the Beneficial Ownership Rule offers several benefits:

1. Enhanced transparency: By identifying the individuals behind legal entity customers, the rule promotes transparency and accountability in financial transactions.
2. Improved risk assessment: Financial institutions can better assess the risks associated with their customers and identify potential money laundering or terrorist financing activities.
3. Strengthened anti-money laundering efforts: The rule provides additional tools for law enforcement agencies to investigate and prevent financial crimes.

When do I need to report my company’s Beneficial Ownership
Information Report to FinCEN? 

A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.

A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

A reporting company created or registered on or after January 1, 2025, will have
30 calendar days from actual or public notice that the company’s creation or
registration is effective to file their initial BOI reports with FinCEN. 

Will there be a fee for submitting a beneficial ownership information
report to FinCEN?

No. There will be no fee for submitting your beneficial ownership information
report to FinCEN.

How will I report my company’s beneficial ownership information?

If you are required to report your company’s beneficial ownership information to
FinCEN, you will do so electronically through a secure filing system available via
FinCEN’s website. at Financial Crimes Enforcement Network's (FinCEN) website.

Conclusion

The FinCEN Beneficial Ownership Rule is a crucial step towards combating money laundering and illicit financial activities. By requiring financial institutions to collect and verify information about beneficial owners, the rule enhances transparency and helps safeguard the integrity of the financial system. Businesses should ensure they understand and comply with the requirements of the rule to avoid penalties and reputational damage.