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Question:

What is the Beneficial Ownership Information Reporting Rule and how does it affect my business?

Answer:

On September 29, 2022, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule establishing a beneficial ownership information reporting requirement. FinCEN designed the rule to help stop criminal actors, such as money launderers and fraudsters, from using anonymous shell companies to hide illicit funds.

Under the rule, which goes into effect on January 1, 2024, most corporations, limited liability companies, and other entities that are created (domestic companies) or registered to do business in the U.S. (foreign companies) will have to report information about their beneficial owners and company applicants to FinCEN. Some types of legal entities, including certain trusts, are exempt from reporting.

The rule includes the following important definitions:

• Beneficial Owner = any individual who, directly or indirectly, either (i) exercises substantial control over a reporting company, or (ii) owns or controls at least 25% of the ownership interests of a reporting company.
  • The final rule provides a detailed definition of “substantial control” and includes those serving as a senior officer and/or having substantial influence (directly or indirectly) over the important decisions of the company.

• Company Applicants = (i) the individual who directly files the document that creates the entity, or in the case of a foreign reporting company, the document that first registers the entity to do business in the U.S., and (ii) the individual who is primarily responsible for directing or controlling the filing of the relevant document by another.

The rule requires entities to report the following information about each company applicant if created/registered after January 1, 2024 and all beneficial owners regardless of when created/registered:

       1. Name;

       2. Birthdate;

       3. Address; and

       4. Unique identifying number and issuing jurisdiction from an

           acceptable identification document (and the image of such 

           document). 

Below are timing requirements for reporting:

FinCEN advised that well in advance of the effective date, it will publish in the Federal Register for public comment the reporting forms that entities will use to comply with these reporting requirements.

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