FinCEN issues beneficial ownership rule, the first of three CTA mandates

The Financial Crimes Enforcement Network today issued a final rule establishing a beneficial ownership information reporting requirement. The rule is part of the ABA-backed Corporate Transparency Act, which was contained within the Anti-Money Laundering Act enacted by Congress last year. It will require most corporations, limited liability companies and other entities created in or registered to do business in the United States to report information to FinCEN about their beneficial owners—those who ultimately own or control the company.

The rule is intended to protect national security and strengthen the integrity and transparency of the financial system by stopping criminal actors from using anonymous shell companies to hide illicit proceeds. Effective Jan. 1, 2024, reporting companies created or registered before that date will have one year (until Jan. 1, 2025) to file their initial reports, while reporting companies created or registered after Jan. 1, 2024, will have 30 days after creation or registration to file their initial reports. Once the initial report has been filed, existing and new reporting companies will have to file updates within 30 days of a change in their beneficial ownership information.

The reporting rule is one of three rules planned as part of implementing the CTA. FinCEN will engage in additional rulemakings to establish rules for who may access beneficial ownership information, for what purposes and what safeguards will be required to ensure that the information is secured and protected, and to revise FinCEN’s customer due diligence rule.