Fincen rolls out rule to simplify beneficial ownership identifiers

William Perry/Bill Perry - stock.adobe.com

WASHINGTON — The Financial Crimes Enforcement Network issued a final rule Tuesday that will allow reporting companies to use an existing Fincen identifier to meet the agency's beneficial ownership reporting requirements, albeit only under certain circumstances. 

The rule would allow companies subject to the rule to use their Fincen identifier — a unique alphanumeric code that firms can obtain from Fincen after receiving required information from an individual or legal entity — in lieu of the entire set of data pertaining to beneficial owners and company applicants that reporting companies will otherwise be required to report. The agency said the final rule responds to comments on the proposed rule that the use of Fincen identifiers could obscure the identities of beneficial owners, resulting in greater secrecy or incomplete or misleading disclosures.

"This final rule is another concrete step toward implementing a beneficial ownership information reporting regime that will enhance corporate transparency in the United States," said Fincen Director Andrea Gacki.

This rule change amends the beneficial ownership information, or BOI, reporting regime the agency initially established after the passage of Corporate Transparency Act in 2020, which amended the Anti-Money Laundering Act to require companies doing business in the United States and their financial partners — namely banks — to report their true owners, thereby stopping shell companies from facilitating money laundering and the financing of terrorism. Reporting companies are obligated to report identifying information about their beneficial owners, the individuals who ultimately own or control the company, and the company applicants who create or register them. The companies are required to begin reporting January 1. 

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Fincen previously introduced the concept of identifiers, which the agency hopes can streamline the BOI reporting process by allowing entities and individuals to provide the required information to Fincen directly. To obtain one, individuals must submit applications containing the same four pieces of personal information reporting companies submit about beneficial owners: their name, date of birth, address and government-issued identification document. Users will also be obligated to update that information as necessary. After applying, the agency says an individual will immediately receive a unique identifier and may report it in place of the otherwise required four pieces of personal information going forward. Fincen will store the information provided in its BOI database for access by authorized users.

The agency says the change aims to strike a balance between simplifying the reporting process and ensuring transparency in identifying beneficial owners.

"The final rule provides clear criteria that must be met in order for a reporting company to report an intermediate entity's Fincen identifier in lieu of information about the individual beneficial owner," a release from the agency noted.

The beneficial ownership "access" rule has received criticism from lawmakers, state attorneys general and anti-corruption advocates who said the rule is unnecessarily complex, and have called on Fincen to make revisions that ensure beneficial ownership data is accessible and accurate.

The American Bankers Association urged Fincen to withdraw the rule earlier this year, saying it was fatally flawed and onerous. Of particular concern to ABA was Fincen's proposed privacy safeguards, which ABA said could hinder banks' access to the registry.

In September the agency released guidance aimed at providing clarity around the reporting requirements after Fincen saw a major leadership shift as Treasury veteran Andrea Gacki replaced acting Fincen head Himamauli Das in July.