On September 29, 2022, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) released the first set of final regulations for the Beneficial Ownership Information Reporting Requirements under the Corporate Transparency Act.
The final regulations require that individuals identified as beneficial owners and applicants of a reporting company must disclose certain identifying information. (For a more detailed discussion of what entities are classified as reporting companies and which individuals are considered beneficial owners and applicants please refer to the previous post in this series about the Corporate Transparency Act.) An individual that is deemed to be a beneficial owner of or applicant for a reporting entity must provide his or her: (i) name, (ii) date of birth, (iii) residential address, (iv) unique identifying number, and (v) his or her photograph from an acceptable government-issued identification document (e.g., passport or driver’s license). Alternatively, an individual can obtain a “FinCEN identifier” and provide this number in lieu of the information listed above.
The final regulations provide further clarification regarding who will be considered a beneficial owner due to his or her ability to exercise “substantial control” over a reporting company by clarifying which individuals are considered senior officers of a reporting company and stating that a trustee may be deemed to exercise substantial control if a trust structure holds ownership interest in a reporting company.
Reporting companies formed prior to the January 1, 2024, effective date will have until January 1, 2025, to file an initial report disclosing the required identifying information about the reporting company itself as well as its beneficial owners. Reporting companies formed on or after January 1, 2024, will have 30 days to file the initial report, which must include the identifying information on the reporting company itself as well as its beneficial owners and applicants. Once the initial report has been filed, both existing and new reporting companies will have to file updates within 30 days of a change in their beneficial ownership information.
In contrast to the proposed regulations, the final regulations limit when information is required to be disclosed in relation to an applicant. The applicants of a reporting company formed before January 1, 2024, are not required to be disclosed. Additionally, after the initial report, a reporting company (regardless of when formed) is not required to update the applicant’s identifying information.
The remaining two sets of regulations under the Corporate Transparency Act, not yet released, are expected to address the framework for access to this beneficial owner information as well as to update the customer due diligence rules surrounding the opening of new accounts by financial institutions.
As the effective date is now set for January 1, 2024, advisors should begin to review and determine which entities will be considered reporting companies and for each reporting company, which individuals will be classified as the beneficial owners and applicants. Additionally, institutions that regularly establish entities and advisors who may be considered to exercise substantial control over entities (e.g., trustees, directors, senior-level employees) should establish internal processes to efficiently monitor and disclose the required identifying information.