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In a recent development, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has unveiled a final rule (RIN 1506-AB49) addressing the utilization of a FinCEN identifier instead of individual beneficiary details when submitting Beneficial Ownership Information (BOI) to FinCEN.

1. FinCEN Identifier Definition:

  • A FinCEN identifier is a unique number issued upon request by FinCEN, streamlining the BOI reporting process for reporting companies.
  • While not mandatory, FinCEN suggests that obtaining an identifier can simplify the reporting procedure, enabling entities or individuals to furnish necessary information directly to FinCEN.

2. Effective Date and Timeline:

  • The final rule, effective January 1, 2024, allows U.S. companies a one-year window to provide information about their beneficial owners, encompassing individuals who ultimately own or control the company.

3. Criteria for Usage of FinCEN Identifier:

  • The final rule outlines specific criteria reporting companies must meet before using an entity’s FinCEN identifier instead of individual beneficiary information.
  • These criteria aim to address concerns raised during the proposal stage that FinCEN identifiers might obscure beneficial owner identities, potentially leading to increased secrecy or incomplete disclosures.

4. Changes Incorporated Based on Feedback:

  • In response to comments received during the proposal phase, FinCEN has made critical changes to the final rule.
  • The entity whose FinCEN identifier is used will now be consistently referred to as “another entity” or “the other entity” to avoid confusion with the reporting company.
  • The final rule emphasizes that it is an individual’s ownership interest in another entity that permits the reporting company to substitute the FinCEN identifier for the individual’s information.

5. Clarity Improvements:

  • According to FinCEN, these changes are designed to enhance the clarity of the provision, increasing the likelihood that reporting companies will use the FinCEN identifier as intended.

6. Background on BOI Reporting Requirement:

  • The BOI reporting requirement is a component of the anti-money laundering initiative established by the Corporate Transparency Act, P.L. 116-283, in 2021.
  • This mandate applies to most companies, with FinCEN estimating approximately 32.6 million filings in the first year of BOI implementation.

In summary, the introduction of FinCEN identifiers represents a strategic move by FinCEN to balance the ease of reporting for companies with the need for transparency in beneficial ownership disclosures, addressing concerns, and ensuring compliance with the Corporate Transparency Act.

Source (Journal of Accountancy news).