[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]]
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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.
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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.
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\1\ Treasury, FinCEN, Beneficial Ownership Information Reporting
Requirements, 87 FR 59498 (Sept. 30, 2022).
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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.
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\2\ See U.S. Department of the Treasury (Treasury), FinCEN,
Beneficial Ownership Information Reporting Requirements, 86 FR 69920
(December 8, 2021).
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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.
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\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).
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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).
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\7\ 87 FR 77404 (Dec. 16, 2022).
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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\
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\8\ 31 U.S.C. 5336(b)(3).
\9\ 31 U.S.C. 5336(b)(3)(C).
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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.
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\10\ 87 FR 77404 (Dec. 16, 2022).
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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.
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\11\ 31 U.S.C. 5336(b)(4).
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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
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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).
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\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.
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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.
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\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).
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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