While the Financial Crimes Enforcement Network’s (FinCEN)
final rule on access to beneficial ownership information (BOI) addressed some
concerns expressed by banks, others remain as the reporting deadline draws near.
Banking advocates asserted the need for guidance to clarify certain elements of
the rule to help small businesses and newly formed entities covered under the
rule.
One key update that banks noted in the final rule is the
addition of language allowing banks to use BOI for various Bank Secrecy Act
compliance purposes and with respect to sanctions.
As the comment period for the final rule neared a close, the
American Bankers Association (ABA) issued a statement to the House Financial
Services Committee ahead of a recent oversight hearing on FinCEN and the Office
of Terrorism and Financial Intelligence. In its statement, the trade group emphasized
the need for additional measures to enhance the implementation of the Corporate
Transparency Act (CTA).
The trade group indicated FinCEN should still take further
action to:
·
“Provide timely guidance necessary to allow
reporting companies, including bank trust services, to accurately comply with
the final reporting rule.
·
“Commit to additional education for small
businesses about the new reporting requirements and facilitate compliance by
providing a paper filing option for those that cannot file electronically.
·
“Ensure that any revisions to the Customer Due
Diligence rule reduce rather than increase unnecessary and duplicative burdens
on banks.”
The ABA outlined several elements of the final rule the
group believes need clarification through guidance to assist the more than 32
million small businesses facing new reporting requirements, especially for
companies formed after Jan. 1 that will be required to meet BOI requirements for
the first time.
Although banks are exempt from reporting obligations under
the CTA, many remain uncertain about whether bank officers and trust division
employees qualify as beneficial owners of reporting companies, particularly
when providing trust services.
“This question primarily arises when a bank provides trust
services (namely, acts as a trustee) for their individual and business
customers,” the group wrote. “A bank’s trust services typically involve
multiple employees across a range of departments (e.g., investment management,
trust administration). As valued fiduciaries, bank senior officers may also be
appointed, in their capacity as bank officers, to serve as trustees. These
bank-administered trusts (as well as trusts where bank employees have been asked
to serve as senior officers in reporting companies) may invest in, or otherwise
exercise ownership or control over, companies, limited liability companies
(LLCs), and other entities who now have new reporting obligations to FinCEN.”
The final rule requires financial institutions that obtain
BOI from FinCEN to develop and implement administrative, technical and physical
safeguards designed to protect the information. It allows institutions to
satisfy this requirement by applying the same security and information-handling
procedures to BOI as they do to protect customers’ nonpublic personal
information, as required by Section 501 of the Gramm-Leach-Bliley Act and its
implementing regulations. Institutions must certify that each BOI request they
submit to FinCEN satisfies applicable criteria. Certain geographic restrictions
apply.
During the oversight hearing, FinCEN Director Andrea Gacki
said her agency had received more than 500,000 BOI reports since the beginning
of the year. Existing entities have until year-end to file, while new
businesses must submit reports within 90 days, a window that will shorten to 30
days starting in 2025.
“The now-ongoing vetted collection of beneficial ownership
information paired with the forthcoming phased provision of access to the [BOI]
database by law enforcement and other authorized users will close what has long
been identified as a gap in the United States anti-money laundering and
countering the financing of terrorism regime,” Gacki said in a statement.
The BOI Access Rule follows FinCEN’s final rule on BOI reporting
standards issued in September 2022, which requires certain corporations,
limited liability companies and other similar entities created in or registered
to do business in the U.S. to report information about themselves, their
beneficial owners and, in some cases, their company applicants. The rule was
created to help authorized BOI recipients protect national security, enforce
laws, and promote other policy objectives identified in the CTA.