[Federal Register Volume 88, Number 215 (Wednesday, November 8, 2023)]
[Rules and Regulations]
[Pages 76995-76997]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24559]



[[Page 76995]]

-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 1010

RIN 1506-AB49


Use of FinCEN Identifiers for Reporting Beneficial Ownership 
Information of Entities

AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: FinCEN is issuing a final rule to specify when and how 
entities required to report beneficial ownership information to FinCEN 
may use a FinCEN identifier to report the beneficial ownership 
information of certain related entities. These regulations amend 
FinCEN's Beneficial Ownership Information Reporting Requirements Rule, 
which implements Section 6403 of the Corporate Transparency Act (CTA). 
The CTA was enacted into law as part of the Anti-Money Laundering Act 
of 2020 (AML Act), which is itself part of the National Defense 
Authorization Act for Fiscal Year 2021 (NDAA).

DATES: This rule is effective January 1, 2024.

FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support Section 
at 1-800-767-2825 or electronically at [email protected].

SUPPLEMENTARY INFORMATION:

I. Introduction

    This final rule sets out certain amendments to FinCEN's Beneficial 
Ownership Information Reporting Requirements Rule \1\ (the Final 
Reporting Rule), which implements Section 6403 of the Corporate 
Transparency Act (CTA), to specify when and how entities required to 
report beneficial ownership information (BOI) to FinCEN may use a 
FinCEN identifier to report the BOI of certain related entities. The 
amendments specify how such entities may use an entity's FinCEN 
identifier to fulfill their BOI reporting obligations under 31 CFR 
1010.380.
---------------------------------------------------------------------------

    \1\ Treasury, FinCEN, Beneficial Ownership Information Reporting 
Requirements, 87 FR 59498 (Sept. 30, 2022).
---------------------------------------------------------------------------

II. Background

    On December 8, 2021, FinCEN published a notice of proposed 
rulemaking for the Beneficial Ownership Information Reporting 
Requirements (the Reporting NPRM).\2\ The Reporting NPRM proposed 
regulations specifying what BOI must be reported to FinCEN pursuant to 
CTA requirements, by whom, and when. In addition, the Reporting NPRM 
proposed processes for obtaining, updating, and using FinCEN 
identifiers. The Reporting NPRM included a 60-day comment period, which 
closed on February 7, 2022, and FinCEN received over 240 comments on 
the NPRM, including multiple comments about the proposed processes for 
obtaining, updating, and using FinCEN identifiers.
---------------------------------------------------------------------------

    \2\ See U.S. Department of the Treasury (Treasury), FinCEN, 
Beneficial Ownership Information Reporting Requirements, 86 FR 69920 
(December 8, 2021).
---------------------------------------------------------------------------

    On September 30, 2022, FinCEN published the Final Reporting Rule, 
with an effective date of January 1, 2024.\3\ The Final Reporting Rule 
requires certain corporations, limited liability companies, and other 
similar entities (collectively, ``reporting companies'') \4\ to report 
certain identifying information about the beneficial owners who own or 
control such entities and the company applicants who form or register 
them.\5\ These requirements are intended to facilitate access to BOI 
for certain authorized recipients, including law enforcement and 
regulators, for the purposes of countering money laundering and the 
financing of terrorism, and for other specific purposes.\6\ The Final 
Reporting Rule requires reporting companies to report to FinCEN within 
prescribed time periods information about themselves, as well as 
information about two categories of individuals: (1) the beneficial 
owners of the reporting company; and (2) the company applicants, who 
are the individuals who filed a document to create the reporting 
company or register it to do business.
---------------------------------------------------------------------------

    \3\ The Reporting Rule is the first in a series of rulemakings 
to implement the CTA, enacted on January 1, 2021, as part of the 
Anti-Money Laundering Act of 2020 and codified at 31 U.S.C. 5336. 
The CTA is Title LXIV of the William M. (Mac) Thornberry National 
Defense Authorization Act for Fiscal Year 2021, Public Law 116-283 
(Jan. 1, 2021) (the NDAA). Division F of the NDAA is the Anti-Money 
Laundering Act of 2020, which includes the CTA.
    \4\ See 31 U.S.C. 5336(a)(11).
    \5\ See Treasury, FinCEN, Beneficial Ownership Information 
Reporting Requirements, 87 FR 59498, 59498-99 (Sept. 30, 2022).
    \6\ Public Law 116-283, Section 6402 (Jan. 1, 2021).
---------------------------------------------------------------------------

    The Final Reporting Rule also established the rules for individuals 
and entities to obtain and update FinCEN identifiers, and the rules for 
use of an individual's FinCEN identifier. However, FinCEN declined to 
finalize the portion of the proposed rule pertaining to the use of an 
entity's FinCEN identifier. Rather, FinCEN re-proposed a small part of 
the Reporting NPRM pertaining to the use of reporting companies' FinCEN 
identifiers for public comment on December 16, 2022,\7\ as part of the 
notice of proposed rulemaking on Beneficial Ownership Information 
Access and Safeguards, and Use of FinCEN Identifiers for Entities (the 
Access NPRM).
---------------------------------------------------------------------------

    \7\ 87 FR 77404 (Dec. 16, 2022).
---------------------------------------------------------------------------

    A FinCEN identifier is a unique identifying number that FinCEN will 
issue to individuals who have provided FinCEN with their BOI and to 
reporting companies that have filed initial BOI reports.\8\ In the 
discussion that follows, FinCEN will refer to these as ``individual 
FinCEN identifiers'' and ``entity FinCEN identifiers,'' respectively. 
The Final Reporting Rule finalized the use of individual FinCEN 
identifiers but not the use of entity FinCEN identifiers. Concerning 
the latter, the CTA specifies that if an individual ``is or may be a 
beneficial owner of a reporting company by an interest held by the 
individual in an entity that, directly or indirectly, holds an interest 
in the reporting company,'' the reporting company may report the 
appropriate entity's FinCEN identifier in lieu of providing the 
individual's BOI.\9\
---------------------------------------------------------------------------

    \8\ 31 U.S.C. 5336(b)(3).
    \9\ 31 U.S.C. 5336(b)(3)(C).
---------------------------------------------------------------------------

    FinCEN originally proposed incorporating this language in the 
Reporting NPRM without significant alteration or clarification. Some 
commenters to the Reporting NPRM, however, expressed concerns that the 
use of entity FinCEN identifiers could obscure the identities of 
beneficial owners in a manner that might result in greater secrecy or 
incomplete or misleading disclosures. Several commenters noted that the 
proposed language could be confusing. Others highlighted problems that 
could arise when the FinCEN identifier is used for reporting companies 
with ownership structures that involve multiple beneficial owners and 
intermediate entities. Persuaded by these comments, FinCEN did not 
adopt the proposed language in the Final Reporting Rule. Instead, 
FinCEN proposed new language in the Access NPRM establishing how 
reporting companies could use an entity's FinCEN identifier. Comments 
received in response to the Access NPRM both addressed this new 
proposal and raised other issues about entity FinCEN identifiers.

III. Use of FinCEN Identifiers for Entities

    Proposed Rule. Proposed 31 CFR 1010.380(b)(4)(ii)(B) provided that 
a reporting company may report another

[[Page 76996]]

entity's FinCEN identifier and full legal name in lieu of the 
information required under 31 CFR 1010.380(b)(1) with respect to the 
beneficial owners of the reporting company, but only if three 
conditions are met: (1) the entity has obtained a FinCEN identifier and 
provided that FinCEN identifier to the reporting company; (2) an 
individual is or may be a beneficial owner of the reporting company by 
virtue of an interest in the reporting company that the individual 
holds through the entity; and (3) the beneficial owners of the entity 
and of the reporting company are the same individuals.\10\ This 
proposal reflected FinCEN's understanding that use of the entity FinCEN 
identifier would best satisfy the CTA's overall statutory scheme--in 
which reporting the intermediate entity's FinCEN identifier would be 
equivalent to reporting the BOI of the reporting company's beneficial 
owners--only if the two entities in fact had the same beneficial 
owners.
---------------------------------------------------------------------------

    \10\ 87 FR 77404 (Dec. 16, 2022).
---------------------------------------------------------------------------

    Comments Received. Several comments supported FinCEN's proposed 
formulation for reporting company use of entity FinCEN identifiers, 
noting that this approach reduced the risk that an entity FinCEN 
identifier could be used in ways that would obscure a reporting 
company's true beneficial owners. This had been a significant concern 
of commenters that were critical of FinCEN's initial formulation in the 
Reporting NPRM. While generally supportive, two commenters proposed 
specific changes to the regulatory text to clarify FinCEN's revised 
approach and to specify that an entity FinCEN identifier could no 
longer be used if the BOI of either the reporting company or the entity 
whose FinCEN identifier was reported changed such that the two were no 
longer identical. Other commenters, without stating a position on 
FinCEN's proposed specification of three limiting criteria for an 
entity's use of a FinCEN identifier, expressed skepticism about the 
wisdom or desirability of both the entity FinCEN identifiers and the 
individual FinCEN identifiers in general. Others posed specific 
implementation questions, such as how a reporting company can be 
expected to verify FinCEN identifier information provided by a 
beneficial owner. One commenter questioned the value of allowing use of 
an entity FinCEN identifier when an individual is ``or may be'' a 
beneficial owner of a reporting company by virtue of an interest held 
in an intermediate entity, notwithstanding the fact that the phrase is 
in the CTA itself. Finally, commenters requested that FinCEN permit 
corporate service providers to apply for entity FinCEN identifiers on 
others' behalf.
    Final Rule. FinCEN adopts the proposed rule, with certain 
revisions. The final rule incorporates changes to clarify the 
circumstances in which an entity FinCEN identifier could be used. These 
changes, which were specifically suggested by commenters, are: (1) to 
consistently refer to the entity whose FinCEN identifier the reporting 
company may use as ``another entity'' or ``the other entity'' rather 
than simply ``the entity,'' in order to avoid confusion with the 
reporting company itself; and (2) to make clear that it is an 
individual's ownership interest in another entity that allows the 
reporting company to report the other entity's FinCEN identifier in 
lieu of the individual's information. FinCEN considers both of these 
changes to improve the clarity of the provision and make it more likely 
that reporting companies will use the FinCEN identifier as intended.
    At the same time, however, FinCEN has not adopted all of the 
revisions suggested by commenters. For example, FinCEN has not removed 
the regulatory text that allows use of an entity FinCEN identifier if a 
beneficial owner of the entity ``may be'' a beneficial owner of the 
reporting company by virtue of an interest held in an intermediate 
entity. As noted above, the CTA expressly permits this, and FinCEN 
retains the clause to give effect to the principle that a reporting 
company should be able to report an entity FinCEN identifier when it 
has a good faith belief that the use is appropriate.
    FinCEN also declines to change the rule text to more specifically 
address the requirement that a reporting company update its BOI report 
if the beneficial owners of the entity whose entity FinCEN identifier 
the reporting company has previously reported cease to be the same as 
the beneficial owners of the reporting company. FinCEN believes that 
the language as proposed is already sufficiently clear on this point. 
The commenters who raised this issue correctly understand that if at 
any time the reportable beneficial owners of either the reporting 
company or the entity whose FinCEN identifier was reported changes such 
that the two are no longer identical, then the reporting company must 
file an update with FinCEN and can no longer report the relevant 
entity's FinCEN identifier. That the commenters understood this 
requirement suggests that additional clarification is not necessary 
and, if appropriate, FinCEN may consider clarifying this requirement in 
the context of guidance or FAQs.
    Finally, with respect to the comments that questioned whether the 
entity FinCEN identifier would actually be of use or value to reporting 
companies, FinCEN has acknowledged that it can only speculate as to the 
likely rate at which reporting companies will request entity FinCEN 
identifiers and the likelihood that they will report entity FinCEN 
identifiers in lieu of information about individual beneficial owners. 
FinCEN will monitor developments on this subject closely as the Final 
Reporting Rule is implemented.

IV. Regulatory Analysis

    This rule is necessary to comply with and implement the CTA and is 
consistent with the CTA's statutory mandate that FinCEN issue 
regulations regarding access to beneficial ownership information.\11\ 
Specifically, the rule amends the BOI reporting regulations to 
implement the provision of the CTA regarding the use of FinCEN 
identifiers codified at 31 U.S.C. 5336(b)(3)(C). The amendments specify 
how reporting companies would be able to use an entity's FinCEN 
identifier to fulfill their BOI reporting obligations under 31 CFR 
1010.380. In particular, the rule establishes a process through which a 
reporting company may report another reporting company's entity FinCEN 
identifier and full legal name in lieu of the information otherwise 
required under 31 CFR 1010.380(b)(1), subject to certain limitations.
---------------------------------------------------------------------------

    \11\ 31 U.S.C. 5336(b)(4).
---------------------------------------------------------------------------

    This rule affects reporting companies that choose to report the 
entity FinCEN identifier of another reporting company in their BOI 
report. It may also affect reporting companies deciding whether to 
request an entity FinCEN identifier.
    FinCEN has analyzed the final rule as required under Executive 
Orders 12866, 13563, and 14094, the Regulatory Flexibility Act, the 
Unfunded Mandates Reform Act, and the Paperwork Reduction Act. This 
final rule will not have an annual effect on the economy of $200 
million or otherwise constitute a ``significant regulatory action'' as 
defined in section 3(f) of Executive Order 12866, as amended. Pursuant 
to the Regulatory Flexibility Act, FinCEN certifies that this rule will 
not have a significant economic impact on a substantial number of small 
entities. FinCEN assessed that this rule results in no additional costs 
to small entities. Furthermore, pursuant to the Unfunded Mandates 
Reform Act, FinCEN concluded that the rule will not result

[[Page 76997]]

in an expenditure of $177 million or more annually by State, local, and 
Tribal governments or by the private sector.\12\ Finally, FinCEN 
assesses that this rule will not result in any additional burden or 
costs considered under the framework of the Paperwork Reduction Act 
(PRA).
---------------------------------------------------------------------------

    \12\ The Unfunded Mandates Reform Act requires an assessment of 
mandates that will result in an annual expenditure of $100 million 
or more, adjusted for inflation. The U.S. Bureau of Economic 
Analysis reports the annual value of the gross domestic product 
(GDP) deflator in 1995, the year of the Unfunded Mandates Reform 
Act, as 71.823, and as 127.224 in 2022. See U.S. Bureau of Economic 
Analysis, ``Table 1.1.9. Implicit Price Deflators for Gross Domestic 
Product'' (accessed Friday, June 2, 2023). Thus, the inflation 
adjusted estimate for $100 million is 127.224/71.823 x 100 = $177 
million.
---------------------------------------------------------------------------

    FinCEN does not assess any additional quantifiable costs or 
benefits, measured in burden hours, associated with the rule beyond 
those separately considered in the Final Reporting Rule's regulatory 
impact analysis (RIA).13 14 Further, FinCEN assesses that 
the rule is consistent with the assumption in the Final Reporting 
Rule's RIA that the cost associated with using entities' FinCEN 
identifiers is accounted for in the cost estimates for the BOI report. 
Additionally, the rule can reduce burden for reporting companies that 
choose to report another reporting company's FinCEN identifier because 
the filing reporting company will provide fewer pieces of information 
on its BOI report. However, FinCEN assesses such burden reduction is 
likely to be minimal relative to the total cost of filling out and 
submitting the report. Furthermore, it is unknown to FinCEN how many 
entities will choose to utilize entity FinCEN identifiers, as provided 
for in this rule. Accordingly, FinCEN does not estimate costs or 
benefits associated with this rule beyond what is stated in the Final 
Reporting Rule RIA.
---------------------------------------------------------------------------

    \13\ See 87 FR 59577-59578 (Sept. 30, 2022).
    \14\ The Final Reporting Rule's RIA did not estimate the number 
of reporting companies that will obtain FinCEN identifiers. A 
reporting company obtains a FinCEN identifier by either checking a 
box on its initial BOI report or submitting an updated BOI report 
with the box checked. Therefore, FinCEN assumed that the cost of 
reporting companies obtaining FinCEN identifiers was included in the 
initial BOI report cost estimates in the final BOI reporting rule 
RIA. See 87 FR 59578 (Sept. 30, 2022).
---------------------------------------------------------------------------

    The rule is statutorily mandated, and therefore, FinCEN has limited 
ability to implement alternatives. Nonetheless, FinCEN considered the 
following alternatives that would be available under the statute: (1) 
implementing the statutory language at 31 U.S.C. 5336(b)(3)(C) as 
written; and (2) implementing the language proposed in the Reporting 
NPRM at 31 CFR 1010.380(b)(4)(ii)(B). However, as explained in Sections 
II and III, FinCEN is promulgating this final rule to address 
ambiguities in the statutory text and concerns raised by commenters 
about the clarity of the provision proposed in the Reporting NPRM and 
the potential for misuse of entity FinCEN identifiers.

List of Subjects in 31 CFR Parts 1010

    Administrative practice and procedure, Aliens, Authority 
delegations (Government agencies), Banks and banking, Brokers, Business 
and industry, Commodity futures, Currency, Citizenship and 
naturalization, Electronic filing, Federal savings associations, 
Federal-States relations, Federally recognized tribes, Foreign persons, 
Holding companies, Indian law, Indians, Insurance companies, Investment 
advisers, Investment companies, Investigations, Law enforcement, 
Penalties, Reporting and recordkeeping requirements, Small businesses, 
Securities, Terrorism, Tribal government, Time.

Authority and Issuance

    For the reasons set forth in the preamble, the U.S. Department of 
the Treasury and Financial Crimes Enforcement Network amend 31 CFR part 
1010 as follows:

PART 1010--GENERAL PROVISIONS

0
1. The authority citation for part 1010 continues to read as follows:

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314 
and 5316-5336; title III, sec. 314, Pub. L. 107-56, 115 Stat. 307; 
sec. 2006, Pub. L. 114-41, 129 Stat. 458-459; sec. 701, Pub. L. 114-
74, 129 Stat. 599.


0
2. Amend Sec.  1010.380, added September 30, 2022 at 87 FR 59498, and 
effective January 1, 2024, by adding paragraph (b)(4)(ii)(B) to read as 
follows:


Sec.  1010.380   Reports of beneficial ownership information.

* * * * *
    (b) * * *
    (4) * * *
    (ii) * * *
    (B) A reporting company may report another entity's FinCEN 
identifier and full legal name in lieu of the information required 
under paragraph (b)(1)(ii) of this section with respect to the 
beneficial owners of the reporting company only if:
    (1) The other entity has obtained a FinCEN identifier and provided 
that FinCEN identifier to the reporting company;
    (2) An individual is or may be a beneficial owner of the reporting 
company by virtue of an interest in the reporting company that the 
individual holds through an ownership interest in the other entity; and
    (3) The beneficial owners of the other entity and of the reporting 
company are the same individuals.
* * * * *

Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2023-24559 Filed 11-7-23; 8:45 am]
BILLING CODE 4810-02-P