The U.S. government’s long-standing efforts to address illegal, domestic financial activity are being addressed with a new beneficial ownership reporting requirement. As of January 1, 2024, any person or entity with state-side entities, (such as and including corporations and state formed Limited Liability Companies) will be subject to a new Beneficial Ownership Information Reporting requirement under the bipartisan Corporate Transparency Act (CTA).

The Final Rule was released by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) on September 27, 2022, pursuant to a Notice of Proposed Rulemaking issued December 8, 2021, and ongoing consultation with other agencies.

FinCEN will facilitate the registration and reporting of entities created in the U.S., with most corporations, limited liability companies, and other entities needing to file reports disclosing the ultimate owners of those entities from January 1, 2024.

Entities formed before January 1, 2024, are given until January 1, 2025, to file their initial reports. Entities formed after the date will be required to file the report within 30 days of formation and will have 30 days to make corrections to any deficiencies in previously filed reports.

The move, described by FinCEN as ‘a historic step’ [1], closes what has long been described as a haven for illicit activities – terrorism financing, and money laundering.

Whilst the Foreign Account Tax Compliance Act (FATCA) has been in operation for several years to address offshore criminal activity, enacted under the HIRE Act of 2010, it has long been known that criminal financial activities could be conducted with ease state-side, due to a lack of reporting of entities including shell companies.

The Beneficial Ownership Information Report is proposed to furnish the name, birthdate, address, a unique identifying number and issuing jurisdiction from an acceptable identification document together with an image with the draft report set to be published for comment in the Federal Register.

The rule is imposed under Corporate Transparency Act’s beneficial ownership information reporting provisions.

[1] FinCEN Issues Final Rule for Beneficial Ownership Reporting to Support Law Enforcement Efforts, Counter Illicit Finance, and Increase Transparency, September 29, 2022.