Fincen beneficial ownership registry goes live

Bloomberg News

WASHINGTON — The Treasury Department's Financial Crimes Enforcement Network Monday said companies can now submit beneficial ownership information (BOI) reports to the agency's long-awaited database, capping a years-long battle in Congress to combat anonymous shell companies. 

The BOI registry — which the Treasury says will help law enforcement and financial institutions identify true owners of most U.S. legal entities — was mandated by the bipartisan Corporate Transparency Act, which passed Congress as part of a defense spending bill in 2021. Treasury Secretary Janet Yellen noted the database will help prevent bad actors from conducting illicit finance while hiding behind the anonymity of shell companies.

"The launch of the United States' beneficial ownership registry marks a historic step forward to protect our economic and national security," Yellen said in a statement. "Having a centralized database of beneficial ownership information will eliminate critical vulnerabilities in our financial system and allow us to tackle the scourge of illicit finance enabled by opaque corporate structures."

Existing applicable reporting companies, or those registered for commerce in the United States prior to January 1, must file their initial reports to Fincen by January 1, 2025, a year from the registry's launch. Businesses created in 2024 have 90 calendar days to file after receiving notice of their company's effective registration. Companies are only required to submit such information — including beneficial owners' identification documents and address — once, and update or correct as needed.

The database officially opened even as Fincen continues to iron out some of the details regarding implementation of the CTA and amid political pushback. The agency previously announced it would release a trio of rules governing businesses' reporting requirements; access by law enforcement and financial entities to the database; and a revised customer due diligence (CDD) rule outlining how financial institutions can utilize the database for anti-money-laundering compliance.

The first of these — known as the "reporting rule," finalized September 2022 — mandates which entities, such as corporations and limited liability companies operating in the United States, would need to report information about their beneficial owners. The second "access rule," released in December, detailed the conditions under which such BOI may be disclosed to law enforcement, financial institutions and regulators. Fincen has yet to issue the third rule concerning customer due diligence. The three-part CTA implementation has also coincided with a major shift in Fincen's leadership, as Treasury veteran Andrea Gacki replaced acting Fincen head Himamauli Das in July.

Political pushback against the database grew as the reporting deadline approached late last year. Republican lawmakers, led by House Financial Services Chairman Patrick McHenry, R-N.C., wrote to Treasury Secretary Janet Yellen and Gacki urging them to postpone the BOI reporting requirements specifically for small businesses, who lawmakers say will have trouble complying with what they characterize as onerous requirements of the reporting rule. 

In September the agency released guidance aimed at providing clarity about the reporting requirements for small businesses.

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September 10, 2018 5:57 PM

Fincen will adopt a phased approach to BOI access, beginning with a pilot program for key federal agency users in 2024. Subsequent stages will extend access to various government agencies, law enforcement partners and financial institutions.

Nikhil Gore, a partner who handles bank regulatory law at Covington & Burling, noted that banks will not immediately be able to access the beneficial ownership information database during the phase in, and that banks will need to wait for the revised customer due diligence requirements before they may be able to utilize the registry to lessen their CDD compliance burden. 

"It remains an open question when banks will obtain access to the Fincen beneficial ownership information database, and how they will be expected to incorporate the database into their customer due diligence and broader anti-money-laundering processes," he said. "Fincen has not yet proposed modifications to the current CDD Rule for banks and, late last year, Fincen indicated that banks likely will not receive access to information in the database until the CDD Rule is revised"

Nate Sibley, a research fellow with Hudson Institute's Kleptocracy Initiative, who worked on the CTA as it was making its way through Congress, said the BOI database represents a powerful new tool law enforcement can leverage to prevent financial crimes.

"The vast majority of honest American business owners will take a few minutes to fill this out once and can then forget about it, [while] unscrupulous professionals who launder dirty money will now have to think twice and ask some basic questions before accepting suspicious customers," he said. "The register immediately  sends a powerful message that America is no longer open for business to those who break our laws and threaten our national security."