FinCEN will allow use of identifier in beneficial ownership reporting

Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule (RIN 1506-AB49) regarding when a reporting company may use an entity’s FinCEN identifier instead of identifying information about an individual beneficial owner when supplying beneficial ownership information (BOI) to FinCEN.

A FinCEN identifier is a unique number that FinCEN will issue upon request after receiving required information. FinCEN does not require entities to obtain an identifier but says it can simplify the BOI reporting process while allowing entities or individuals to provide required information directly to FinCEN.

The final rule, issued Tuesday, amends FinCEN’s final BOI reporting rule. Under the rule, which is effective Jan. 1, 2024, millions of U.S. companies will have one year to provide information about their beneficial owners — the people who ultimately own or control the company.

The final rule provides criteria that must be met before a reporting company can use an intermediate entity’s FinCEN identifier instead of information about the individual beneficial owner. In a news release, FinCEN stated that 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

The changes incorporated in the final rule in response to comments are:

• To consistently refer to the entity whose FinCEN identifier the reporting company may use as “another entity” or “the other entity” rather than simply “the entity,” to avoid confusion with the reporting company itself; and
• To make clear that it is an individual’s ownership interest in another entity that allows the reporting company to report the other entity’s FinCEN identifier in lieu of the individual’s information.

Both changes will “improve the clarity of the provision and make it more likely that reporting companies will use the FinCEN identifier as intended,” FinCEN said in the preamble to the final rule.

The BOI reporting requirement is an anti-money laundering initiative enacted through the Corporate Transparency Act, P.L. 116-283, in 2021, mandating that BOI be reported to FinCEN. The requirement would apply to most companies, with FinCEN estimating about 32.6 million filings in the first year of BOI implementation.

The rule issued Tuesday follows proposed rules issued in December 2022.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.