The Financial Crimes Enforcement Network ("FinCEN") issued a final rule requiring certain entities to identify their beneficial owners and those individuals involved in creating or qualifying the entity to do business in the United States.
On September 29, 2022, FinCEN issued a final rule implementing the Corporate Transparency Act's ("CTA") beneficial ownership information reporting provisions. According to FinCEN, these requirements are designed "to crack down on illicit finance and enhance transparency." The final rule is effective January 1, 2024.
The final rule requires certain entities to file reports that identify their beneficial owners and certain individuals creating or qualifying the entity to do business in the United States. Entities subject to the filing requirement are domestic corporations, domestic limited liability companies ("LLCs"), and domestic entities created by filings with a secretary of state or similar office. Filing is also required of foreign corporations, foreign LLCs, or other foreign entities that register to do business in any U.S. jurisdiction. The CTA exempts 23 specific types of entities, including banks, brokers, and accounting and insurance firms, from the filing requirement.
Under the rule, a beneficial owner is an individual who, directly or indirectly, either owns or controls at least 25% of the reporting entity or exercises substantial control over the reporting entity. Those in "substantial control" include senior officers and those with authority to appoint or remove them (or a majority of the board or similar body), or that have substantial influence over the entity's decisions. Accordingly, most corporate filings will need to identify senior officers, even if none own or control 25% of the reporting entity. Name, birthdate, address, and a unique identifying number and an image of an acceptable identification document must be disclosed for each beneficial owner.
Reporting companies created or registered before January 1, 2024, will have until January 1, 2025, to file their initial report with FinCEN, while companies created or registered after January 1, 2024, will have 30 days after their notice of creation or registration to file the initial report.
As FinCEN continues implementing the CTA, one can expect additional FinCEN rulemaking in the future that will clarify the disclosure of beneficial ownership information to authorized recipients and revisions to FinCEN's customer due diligence rule.
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