Enforcement The Final Rule allows for the imposition of civil and criminal penalties for willful violations of the Final Rule. The enforcement will be imposed against the person who causes the violation or is a senior officer of the entity at the time of the failure. Timing The effective date of the Final Rule is Jan. 1, 2024. Reporting companies created or registered before Jan. 1, 2024, have one year (until Jan. 1, 2025) to file their initial BOI reports; reporting companies created or registered after Jan. 1, 2024, will have 30 days after receiving notice of their creation or registration to file their initial reports. Consequently, we expect the BOI report forms and the reporting system to be in place before the end of this year. Changes in beneficial ownership are to be reported within 30 days of the change. If a BOI is incorrect or inaccurate, the BOI must be corrected within 30 days of when the reporting company becomes aware or has reason to know of the inaccuracy. FinCEN is developing the infrastructure to administer the requirements of the Final Rule and safeguard the confidentiality of the information to be reported, including the information technology to be used to store BOI, what FinCEN has called the Beneficial Ownership Secure System, or “BOSS” for short. It will be cloud-based and will meet the highest Federal Information Security Management Act level (FISMA High rating). The target date for the system to begin accepting BOI reports is Jan. 1, 2024. Proposed BOI Access and Safeguards Rules A Notice of Proposed Rulemaking for BOI Access and Safeguards was issued on Dec. 15, 2022. As anticipated, it proposes to allow financial institutions using BOI to facilitate compliance with their customer due diligence requirements to access the BOSS. Others authorized to access the BOSS includes the U.S. Treasury Department; federal, state, local, and tribal government agencies requesting BOI for specific purposes; and foreign law enforcement agencies requesting BOI for specific purposes. The Proposed BOI Access and Safeguards Rules also impose requirements on the recipients of the BOI information, to have standards and procedures for storing the information in a secure system to which only authorized personnel have access and only for authorized purposes. These standards and procedures are subject to audit and include requirements to certify compliance with the CTA and these proposed regulations. For financial institution access, a financial institution must obtain consent from the reporting company for its BOI from the BOSS. The financial institution would then submit identifying information specific to a reporting company and, in return, receive an electronic transcript with that entity’s BOI. Civil and criminal penalties can be imposed against anyone who knowingly discloses or unlawfully uses BOI obtained from a BOI report to, or disclosure of BOI from, FinCEN. Next Steps Scan the QR code to submit written comments on the Proposed Access and Safeguard Rules to FinCEN on or before Feb. 14, 2023. www.federalregister.gov/ documents/2022/12/16/2022-27031/beneficialownership-information-access-and-safeguardsand-use-of-fincen-identifiers-for-entities FinCEN is in the process of developing rulemaking to revise FinCEN’s customer due diligence rule in light of the Final Rule. FinCEN expects to issue the revisions no later than Jan. 1, 2024. FinCEN will be publishing drafts of BOI report forms to be used by reporting companies and will provide a period of time for public comment before finalizing the forms. FinCEN says it will publish the draft forms “well in advance” of the effective date of the Final Rule. FinCEN is also in the process of drafting and issuing compliance and guidance documents to assist reporting companies, including a Small Entity Compliance Guide pursuant to federal statute. Conclusion FinCEN’s Final Rule implementing the reporting of beneficial ownership information of reporting companies is just the first of three rule makings in connection with the Corporate Transparency Act. For financial institutions, the Proposed Access and Safeguard Rules make it clear that they will be given access to BOSS to obtain their customer’s BOI, and it indicates that financial institutions will continue to have customer due diligence requirements, but we await the rulemaking designed to conform our existing Customer Due Diligence processes and procedures to the Final Rule. ■ Spencer Fane attorney Ed Burdzinski can be reached at (713) 212-2670 and eburdzinski@spencerfane.com. 16 | The Show-Me Banker Magazine
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