LEGAL EAGLE SPOTLIGHT Background The Beneficial Ownership Rules (BOR) issued by FinCEN were first proposed as part of the Bank Secrecy Act (BSA). FinCEN’s stated aim was to improve financial transparency and prevent criminals and terrorists frommisusing entities to disguise illegal activities. The BOR became effective July 11, 2016 and made mandatory May 11, 2018. For accounts that were opened before May 11, 2018, those were grandfathered, except for any subsequent change of beneficial ownership. For all accounts, the beneficial ownership is required to be recertified at each new account opening. These rules remained unchanged until the Corporate Transparency Act (CTA) was enacted in 2021. Pursuant to that legislation, FinCEN was tasked with issuing proposed regulations requiring most legal entities to register their Beneficial Ownership Interests (BOI) with FinCEN, and to conform the current BOR to the expanded definitions and scope of BOI. Beneficial Ownership Rules Update Ed Burdzinski Spencer Fane LLP On Dec. 8, 2021, FinCEN issued its proposed regulations under the CTA. After evaluating public comments on the proposed regulations, the Final Rule was announced on Sept. 29, 2022. The Final Rule places the burden on reporting companies, not the financial institutions, to report their BOI to FinCEN. The reporting requirements of the Final Rule take effect Jan. 1, 2024. However, the Final Rule does not dismiss the customer due diligence requirements imposed on financial institutions. Instead, FinCEN also announced that the Final Rule is only one of three rulemakings planned to implement the CTA. FinCEN will also issue rules setting forth who may access BOI, for what purposes and what safeguards will be required to ensure that the information is secured and protected, and will revise FinCEN’s customer due diligence rule to conform with the Final Rule. On Dec. 15, 2022, FinCEN issued a Notice of Proposed Rulemaking (NPRM) concerning “The Final Rule allows for the imposition of civil and criminal penalties for willful violations of the Final Rule.” 14 | The Show-Me Banker Magazine
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