Tired of reading about mighty institutions tumbling? Not ready for another article about what went wrong at Signature Bank, Silicon Valley, and Credit Suisse?
We understand. And in fact, now might be the ideal moment to dig into the mountain of routine bank compliance tasks awaiting you.
To get started, here are some of the implications of FinCEN’s new beneficial ownership information (BOI) reporting rule, which will go into effect on January 1, 2024.
The Final Rule, Explained
The first part of the final version of FinCEN’s long-awaited BOI reporting rule was published on September 29, 2022. The hope is that this rule, which is designed to make ownership of corporate entities more transparent, will make it harder for criminals to launder money or hide assets.
Much of what the rule consisted of was familiar territory as FinCEN had unveiled its proposed rule on December 8, 2021. That said, it’s important to remember that this rule is only the beginning—further rule making is expected to be announced in the coming months.
With the final rule, community banks and credit unions that had hoped for an exemption from reporting on BOI were sorely disappointed. Although the new rule will mean that business customers (known as reporting companies) must report company information, such as name, address, and EIN, to FinCEN directly, financial institutions are still required to collect and report this information as well.
Here’s how ICBA, the Independent Community Bankers of America, expressed its position on BOI reporting:
“From the onset of the CDD Rule’s development, ICBA’s position has been and continues to be that if the government has an interest in collecting and maintaining records of beneficial ownerships of private legal entities, such information should be collected and verified at the time a legal entity is formed, rather than requiring FIs to collect this information. ICBA’s position also calls for FIs to have access to that information to assist them in performing customer due diligence.”
For more, see ICBA's February 14, 2023, letter to FinCEN.
Some are speculating that requiring business customers to furnish information that was already reported to FinCEN may become an increasingly unpleasant task for financial institutions.
New York-based law firm Harris Beach, commenting on the situation, anticipates “frustrated business customers because they will have to incur time and financial costs reporting the information to the FinCEN and then turn around and report BOI again to the bank or credit union.”
What Now?
For certain corporations and limited liability companies this new reporting requirement will mean a lengthier to-do list.
For community banks and credit unions, no dramatic change is coming—just yet. As of now, financial institutions will continue to collect BOI in the same ways they have since 2018.
Even though there are no new reporting expectations, now is an excellent time to make sure that your BOI collection process is running smoothly.
As the very existence of FinCEN’s new BOI rule suggests, countering illicit financial schemes is a high priority for regulators. And this is not likely to change. It seems clear that financial institutions are expected to continue to play a key role in making sure that money launderers and other wrongdoers are caught.
What’s more, additional rulings on BOI reporting are expected to be released in 2023. These rules may require community banks and credit unions to modify their processes as part of new CDD requirements.
Looking for more on the Corporate Transparency Act and the final BOI rule? Check out our webinar for a deeper dive.
