​FinCEN sets access rules for beneficial ownership registry

Starting Jan. 1, FinCEN will require corporations, limited liability companies, and similar entities to report certain information about their beneficial owners, defined as “the individual natural persons who ultimately own or control the companies.”

Such owners would be required to provide their full legal name, residential or business address, and a unique number available from an identity document. In lieu of that unique number, beneficial owners could request FinCEN create an identification number for them, called a “FinCEN identifier.” This information will be kept in a confidential database, the BOI registry, administered by FinCEN.

FinCEN’s BOI registry access rule, released Thursday and set to be published Friday in the Federal Register, lists the entities that will be allowed to access the database, including:

• Federal law enforcement agencies using “appropriate protocols”;
• Federal agencies fulfilling requests of certain “foreign requesters,” like foreign law enforcement agencies;
• The U.S. Treasury and its agents; and
• State, local, and tribal law enforcement agencies with a court order.

Financial institutions can also access the database, using appropriate protocols, in the process of complying with FinCEN’s 2016 customer due diligence (CDD) rule.

The access rule will take effect 60 days after publication in the Federal Register.

In response to comments from the banking industry, FinCEN expanded the definition for the purposes for which financial institutions can cite as reasons to be granted access to the database. The agency originally proposed a narrow definition, restricting access only as it related to “customer due diligence requirements under applicable law.”

The final access rule includes a more expansive definition for access: “Any legal requirement or prohibition designed to counter money laundering or the financing of terrorism, or to safeguard the national security of the United States, to comply with which it is reasonably necessary for a financial institution to obtain or verify beneficial ownership information of a legal entity customer,” according to a FinCEN fact sheet on the rule.

Gary Kalman, executive director of Transparency International U.S., praised the expanded definition.

“FinCEN also made important and pragmatic changes to allow beneficial ownership information to be used by financial institutions for the full array of legally required know your customer protocols, including screening for possible sanctions violations and identifying other types of illicit financial activity,” he said in an emailed statement.

Financial institutions seeking to search for records in the BOI registry must also “develop and implement administrative, technical, and physical safeguards reasonably designed to protect the information,” the fact sheet said. FinCEN said it is the same security and information handling procedures financial institutions already use to protect customers’ nonpublic information.

The American Bankers Association (ABA), which supported the establishment of a BOI registry but was critical of some of its elements, said the final rule incorporated many of its suggested tweaks.

“Although many important details remain to be determined as FinCEN continues its implementation work, the final rule for accessing the database includes a number of ABA recommended changes,” said ABA President Rob Nichols in a statement. “These improvements will help enable the registry to deliver on its promise of providing law enforcement and financial institutions with highly useful information: the true owners of businesses.”

FinCEN still must engage in a third rulemaking to revise its CDD rule so that it complies with the Corporate Transparency Act, the fact sheet said.