WASHINGTON — The Treasury Department has issued its final beneficial ownership rule requiring corporations that do business in the United States disclose who owns or controls the company.
The rule implements the Corporate Transparency Act, a 2019 law supported by banks who want true-owner reporting requirements to fall on companies, and not their financial institutions. Treasury said it will address this part of the law, revising its "due diligence rule," in the future.
In the meantime, Treasury officials said that the rule will help regulators shore up financial markets from illicit actors. Treasury
"Recent geopolitical events have reinforced the point that abuse of corporate entities, including shell or front companies, by illicit actors and corrupt officials presents a direct threat to the U.S. national security and the U.S. and international financial systems," Treasury said.
Treasury Secretary Janet Yellen said that the announcement is a "major step forward" in cracking down on bad actors who are taking advantage of the U.S. financial system for illicit purposes. Specifically, Treasury has recently targeted the financial holdings of Russian oligarchs who have been bankrolling Russian President Vladmir Putin and the country's invasion of Ukraine.
According to the rule, a beneficial owner is someone with "substantial control" or who owns at least 25% of the company, the Financial Crimes Enforcement Network, a bureau of the Treasury Department, said.
The rule will be effective on the first day of 2024. Reporting companies existing on or before that date will have one year to file their initial reports, while those created after will have 30 days from their registration.
Treasury said it estimated the compliance burden for businesses with simple structures would be approximately $85, though costs would vary by state. Fincen said it expects the majority of companies fall into that category.
Fincen also said it would issue additional rules pursuant to the CTA regarding who may access beneficial ownership information and conforming rules regarding customers' due diligence obligations.
