The passing of the landmark U.S. Corporate Transparency Act (CTA) as part of the greater National Defense Authorization Act in 2021 created a major ripple effect on the American financial realm, one that’s impact is truly beginning to be felt as 2023 draws to a close. Arguably the most significant aspect of the CTA is that the measure led to the development of a national beneficial ownership registry that would require corporations, limited liability companies, and similar entities to report certain information about their beneficial owners (the individual, “natural persons” who ultimately own or control these companies), as well as individuals found both domestically and/or abroad who have filed an application with specified governmental authorities to create the entity or register it to do business, to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). It also required FinCEN to maintain strict protocols to ensure that all reported beneficial ownership information is collected and stored in a confidential, secure, and non-public register, this as FinCEN will launch its beneficial ownership information technology system to securely collect, process, and store that information at the turn of the new year. All told, the measure is seen as a major boon to ongoing national financial crime and anti-terror initiatives given the stark increase in transparency it could provide overall, while casting a light on a vehicle that has been abused for money laundering purposes by white-collar criminals, foreign nationals, and terror/crime organizations for decades.
With these novel reporting requirements looming – the BOI Reporting Rule comes into effect on January 1, 2024 – pressure is mounting on covered institutions to ensure that their new protocols are in place to avoid potential ramifications for non-compliance. Yet as this deadline approaches, the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is continuing to release pivotal new details regarding access to this beneficial ownership information provided. This past week, FinCEN announced its ‘final rule’ in this regard that effectively establishes a framework for access and protection of beneficial ownership information (BOI). All told, these regulations implement the strict protocols required by the CTA to protect sensitive personally identifiable information (PII) reported to FinCEN and establish the circumstances in which specified recipients have access to BOI, along with data protection protocols and oversight mechanisms applicable to each category of recipient.
The “Access Rule” found within the new measure will also explicitly define who is authorized to view the information reported (i.e. law enforcement bodies, various federal agencies, and even local government officials). In addition, financial institutions with customer due diligence requirements and regulator supervision will also reportedly be granted access to the list of ownership information for U.S.-listed corporate entities. In spite of this widened scope of access, FinCEN is actively working to ensure that this sensitive BOI is not made available to unauthorized individuals.
The recently announced Access Rule is a follow-up to the final BOI Reporting Rule that FinCEN issued back in September 2022, with changes made based as a result of public comments received in response to the agency’s Notice of Proposed Rulemaking (NPRM) issued roughly one year ago. The most significant modifications involved the gross scope of financial institution access to BOI, new limitations on offshore access to BOI, and the streamlining of procedures for state, local, and tribal law enforcement to gain access to BOI.3 None of the key priorities of the measure have changed however, as the final rule maintains the ability of the Treasury to empower authorized BOI recipients to better protect national security and enforce the laws/regulations outlined by the CTA.
There are six specific categories of recipients authorized for BOI access under certain circumstances. These include:
(1) U.S. Federal agencies engaged in national security, intelligence, or law enforcement activity; (2) U.S. State, local, and Tribal law enforcement agencies; (3) foreign law enforcement agencies, judges, prosecutors, central authorities, and competent authorities (foreign requesters); (4) financial institutions using BOI to facilitate compliance with customer due diligence (CDD) requirements under applicable law; (5) Federal functional regulators and other appropriate regulatory agencies acting in a supervisory capacity assessing financial institutions for compliance with CDD requirements under applicable law; and (6) Treasury officers and employees.1
Each of the above recipients will also be subject to specific requirements for confidentiality and security in line with the CTA.
“This final rule is a significant step forward in our efforts to protect our financial system and curb illicit activities,” said FinCEN Director Andrea Gacki. “BOI can provide essential information to law enforcement, intelligence, and national security professionals as they work to protect the United States from bad actors who exploit anonymous shell companies to engage in money laundering, corruption, sanctions and tax evasion, drug trafficking, fraud, and a host of other criminal offenses with impunity, while legitimate businesses suffer from their misdeeds.”2
The Access Rule is the third component of a trilogy of final rules planned ahead of the CTA’s final implementation. The first was the aforementioned BOI Reporting Rule. Financial institutions and other related industries must remain up to date as the CTA nears its full rollout in the coming year. The final rule regarding access to BOI becomes effective on February 20, 2024.
A fact sheet detailing the intricacies of the BOI Access and Safeguards Final Rule can be found here.
Citations
- “Fact Sheet: Beneficial Ownership Information Access and Safeguards Final Rule.” Financial Crimes Enforcement Network, The U.S. Department of the Treasury, 21 Dec. 2023.
- “Fincen Issues Final Rule Regarding Access to Beneficial Ownership Information.” FinCEN Issues Final Rule Regarding Access to Beneficial Ownership Information | FinCEN.Gov, The U.S. Depertment of the Treasury, 21 Dec. 2023.
- Waggoner, Martha. “Final Rule Issued on Access to Beneficial Ownership Information.” Journal of Accountancy, Journal of Accountancy, 21 Dec. 2023.
