FinCEN Issues Rulemaking Notice Seeking Improvement on the Disclosure of Beneficial Ownership Information

On April 1, 2021, the Financial Crimes Enforcement Network (“FinCEN”) released an advance notice of proposed rulemaking (ANPRM) regarding the new beneficial ownership reporting provisions of the Corporate Transparency Act (CTA).
The CTA requires reporting companies — generally, corporations, limited liability companies and similar entities with 20 or fewer employees and annual gross income of $5 million or less, with certain categorical exemptions — to submit to FinCEN specified beneficial ownership information, e.g., the identity of the natural persons who form or register the reporting companies.

The CTA requires “reporting companies” to submit a report to FinCEN identifying:

1. Each of their “beneficial owners” and
2. “Applicants” by full legal name,
3. Date of birth,
4. Current residential or business street address, and
5. Unique identifying number from an acceptable identification document (e.g., a valid passport or driver’s license number) or the individual’s FinCEN identifier.

The CTA defines a “beneficial owner” as an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, owns or controls 25% or more of the ownership interests of the entity or exercises “substantial control” over the entity.

Comments on the ANPRM closed on May 5, 2021. FinCEN intends to use the responses to the ANPRM to inform the Secretary of the Treasury’s promulgation of implementing regulations.

FinCEN has until January 1, 2022, to promulgate regulations implementing the reporting requirements of the CTA, with a subsequent effective date to be determined.

While that may seem to be well into the future, financial institutions are encouraged to closely follow FinCEN’s rulemaking developments. Among the issues of concern that seem to have been brought up by the ANPRM, FinCEN appears to be considering reporting requirements that ask for more information than those originally outlined in the CTA.

While the commenting period is now closed, financial institutions, reporting companies, and others should pay close attention to the adoption of new rules based on comments received to the ANPRM.

How AbitOs Can Help
The proposed new rules of determining beneficial ownership under the CTA fall under the broader implications of FinCEN’s anti-crime provisions under the USA PATRIOT Act (the Act). Our experts are quite familiar with all of the original and updated guidance for the sharing of information under the Act. We can help to make sure that you understand when and how to share information regarding suspected terrorist financing or money laundering under all current and proposed FinCEN guidelines.

AbitOs specializes in the unique needs of high net-worth individuals with international lifestyles and accounting concerns. Compliance with all FinCEN reporting requirements under the USA Patriot Act can be quite complex. If you would like to benefit from our expertise in these areas or if you have further questions on this Alert, do not hesitate to contact us.