FinCEN Announces Final Rule on Beneficial Ownership Reporting: A Leap Forward in Combatting Illicit Finance
Immediate Release – September 29, 2022, WASHINGTON
In a significant move to fortify the fight against illicit finance and boost transparency within the U.S. financial system, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury has issued a landmark final rule. This development, rooted in the bipartisan Corporate Transparency Act (CTA), mandates most corporations, limited liability companies, and other entities in the U.S. or registered to do business here to report their beneficial owners to FinCEN.
This rule aims to shield U.S. national security and enhance the integrity and transparency of the financial system. It targets criminal elements, including oligarchs and traffickers, who exploit anonymous shell companies to conceal and launder illicit proceeds within the United States.
Acting FinCEN Director Himamauli Das emphasized the critical nature of this rule, stating, “For too long, it has been far too easy for criminals, Russian oligarchs, and other bad actors to fund their illicit activity by hiding and moving money through anonymous shell companies and other corporate structures right here in the United States.” Das highlighted the rule’s significance in aiding national security, intelligence, and law enforcement agencies in their battle against illicit activities and in safeguarding American taxpayers and legitimate businesses from the repercussions of these criminal endeavors.
The final rule is the result of extensive bipartisan efforts by Congress, the Treasury, and various stakeholders to strengthen the U.S. corporate transparency framework and address the gaps in the anti-money laundering regime identified by the Financial Action Task Force. It also aligns with commitments made by the United States in the lead-up to the December 2021 Summit for Democracy and in the U.S. Strategy on Countering Corruption.
Set to take effect on January 1, 2024, the rule stipulates that entities formed or registered before this date must file their initial reports by January 1, 2025. Entities established or registered after the onset of 2024 have a 30-day window post-creation or registration to comply with the reporting mandate. All reporting entities are required to update their beneficial ownership information within 30 days of any changes.
FinCEN is dedicated to implementing these statutory obligations effectively while minimizing the reporting burden on companies. This initiative is part of a trio of rulemakings aimed at fully implementing the CTA. Future rulemakings will focus on defining access parameters to beneficial ownership information and revising FinCEN’s customer due diligence rule. Additionally, FinCEN is developing the necessary infrastructure, including a secure information technology system, to manage these requirements in compliance with the CTA’s stringent security and confidentiality protocols.
This final rule marks a pivotal advancement in the United States’ efforts to counteract corruption and illicit financial flows, ensuring a more transparent, secure, and fair financial landscape for all.