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FinCEN Issues Final Rule on Access to Beneficial Ownership Information Under the Corporate Transparency Act
Practical Law Legal Update w-041-8133 (Approx. 4 pages)
FinCEN Issues Final Rule on Access to Beneficial Ownership Information Under the Corporate Transparency Act
by Practical Law Finance
| Law stated as of 21 Dec 2023 • USA (National/Federal) |
On December 21, 2023, the US Department of Treasury's Financial Crimes Enforcement Network (FinCEN) issued a final rule that implements the access and safeguard provisions of the Corporate Transparency Act (CTA).
On December 21, 2023, the US Department of Treasury's Financial Crimes Enforcement Network (FinCEN) issued a final rule (Final Rule) that implements the access and safeguard provisions of the Corporate Transparency Act (CTA). The Final Rule:
- Sets out how beneficial ownership information (BOI) reported to FinCEN under the CTA may be disclosed to authorized BOI recipients, including:
- Federal agencies engaged in national security, intelligence, or law enforcement activity.
- State, local, and tribal law enforcement agencies with court authorization.
- Foreign law enforcement agencies, judges, prosecutors, and other authorities that meet specific criteria.
- Financial institutions with customer due diligence requirements and their supervisory regulators.
- US Department of the Treasury officers and employees.
- Prescribes how BOI must be protected by its recipients, including security and confidentiality protocols they must adhere to.
The Final Rule follows:
- FinCEN's final BOI Reporting Rule issued on September 30, 2022, which requires certain entities created or registered in the US to report prescribed beneficial ownership information to FinCEN. (For more information, see Practice Note, Corporate Transparency Act Beneficial Ownership Reporting.)
- FinCEN's December 16, 2022 Notice of Proposed Rulemaking (Proposed Rule) on BOI disclosure and safeguards (see Article, FinCEN's Proposed Rule on Access to the Beneficial Ownership Registry: Implications for Financial Institutions).
Under the Final Rule, financial institutions may request BOI from FinCEN for purposes of complying with their customer due diligence legal requirements if they have obtained the relevant company’s consent. The Final Rule broadens the definition of qualifying customer due diligence requirements to include any law designed to counter money laundering or the financing of terrorism, or to safeguard national security, provided that obtaining BOI is reasonably necessary for the financial institution to fulfill that legal requirement. This may include, for example:
- Anti-money laundering program, customer identification, Suspicious Activity Report filing, and enhanced due diligence requirements under the Bank Secrecy Act.
- Compliance with sanctions imposed by the Office of Foreign Assets Control (OFAC).
Under the Proposed Rule, financial institutions would have been limited to requesting BOI solely to satisfy the BOI identification and verification requirements set out under 31 C.F.R. § 1010.230.
(For more information on Bank Secrecy Act and OFAC requirements, including BOI identification and verification, see Practice Note, US Anti-Money Laundering and Trade Sanctions Rules for Financial Institutions.)
Financial institutions that obtain BOI from FinCEN must develop and implement safeguards designed to protect this information. This requirement may be satisfied by applying the same security and information handling procedures financial institutions use to protect customers’ nonpublic personal information under Section 501 of the Gramm-Leach-Bliley Act and its implementing regulations. (See Practice Note, GLBA: The Financial Privacy and Safeguards Rules.)
BOI recipients are generally prohibited from re-disclosing BOI except in eight specific circumstances. Notably for financial institutions, re-disclosure is authorized:
- Among officers, employees, agents, and contractors within a particular authorized recipient entity.
- With their regulators, including qualifying self-regulatory organizations.
FinCEN is implementing a phased approach to providing access to its BOI database. The first stage involves a pilot program for certain government agency users in 2024. The second stage extends access to US Department Treasury offices and certain other government agencies. In the final stage of the rollout, financial institutions and their supervisory agencies will gain access to the BOI database.