FinCEN Beneficial Ownership Database: Answers to Common Questions
In September 2022, the Financial Crimes Enforcement Network (FinCEN) issued the beneficial ownership Reporting Rule, establishing a roadmap to a new resource for obtaining beneficial ownership information. The new rule, implementing portions of the Corporate Transparency Act (CTA) requires FinCEN to collect beneficial ownership information from all non-exempt legal entities in the United States. Ultimately, this information will be available to financial institutions, government and law enforcement agencies. Financial Instructions will be able (but not required) to use the database to collect beneficial ownership information for new business account relationships instead of obtaining the information directly from the customer.
As your bank prepares to incorporate the FinCEN database into its beneficial ownership procedures you may have questions about timing, contents, access and more. Here is a mini-FAQ to clarify some of the most common questions about the new database. In addition, FinCEN maintains a more comprehensive FAQ on the population and use of their beneficial ownership database, with the latest version available here.
FinCEN Beneficial Ownership FAQ
Q: What must my bank do to gain access to the FinCEN database?
A: In December 2023, FinCEN released the Access Rule which details who will be able to use the database and how they will gain access. Resources to understand this rule include a Fact Sheet published at the same time as the rule. The Access Rule Small Entity Compliance Guide also provides a useful summary. In brief, FinCEN will notify banks when financial institution access is ready and you will be able to register at that time.
Q: Does my customer need to file with the FinCEN database?
A: The Reporting Rule includes details on which entities will file with the new FinCEN database. A Fact Sheet is available which summarizes the rule. As was true with previous beneficial ownership rules, there are certain legal entities that are except from filing with FinCEN. These are very similar to previously exempt entities and include publicly traded companies, most financial institutions, public and government agencies and more. A rule of thumb is any legal entities already required to file ownership information elsewhere are exempt from filing with FinCEN. In addition, legal entities with 20 or more employees and $5 million or more in annual revenue are likely exempt. The Reporting Rule Small Entity Compliance Guide includes a listing of the 23 exemptions and details on how each applies.
Q: What is my customer’s deadline to register with FinCEN?
A: Non-exempt legal entities that existed before 2024 have until January 1, 2025 to register. Most legal entities established in 2024 must file ownership information with FinCEN within 90 days of formation. Legal entities formed January 1, 2025 or later will have 30 days to register with FinCEN. Any updates, changes or corrections to the information collected in the database must be reported by the legal entity within 30 days of the change.
Q: Where can I go for more information on FinCEN’s Beneficial Ownership Database?
A: FinCEN’s Beneficial Ownership Website should be the first stop for banks and their customers when looking for information on the new database. This site is also where companies go to file their beneficial ownership information. In addition, the Small Entity Compliance Guide is an excellent resource to help community banks and their small business customers understand changes in existing Beneficial Ownership rules necessitated by recent FinCEN rulemaking.
Q: What’s next?
A: Currently, only certain government agencies have access to the FinCEN database due to a phased approach used to grant access. Many legal entities existing before January 1st of this year have not yet registered in any case. FinCEN has not yet announced precisely where banks will access the database, though it will be through a secure website. The Access Rule includes details on what information will need to be submitted to launch an inquiry. This will include business name and ID number. In addition, there is a third rule that will be published no later than January 1, 2025 that will bring current requirements around customer due diligence and beneficial ownership (Chapter X §1010.230) into alignment with the FinCEN database. This will iron out the differences between previous and new rules and allow banks to maintain compliance while using the database to obtain beneficial ownership information.