FinCEN Issues Reference Guide on Beneficial Ownership Reporting
Commentary by Andrew Lom
FinCEN issued new guidance to clarify the beneficial ownership information that businesses and financial institutions must report under two separate regulatory requirements.
In its "Beneficial Ownership Information Reference Guide," FinCEN addressed: (i) "reporting beneficial ownership information to FinCEN under the CTA [("Corporate Transparency Act")]; and (ii) "providing beneficial ownership information to financial institutions in connection with Federal customer due diligence requirements."
In the Guide, FinCEN asked and answered the following questions:
- "Will an entity potentially have to provide beneficial ownership information to both FinCEN and a financial institution?" Answer: yes. "FinCEN and financial institutions both collect beneficial ownership information from entities. However, they collect that information for different reasons and, in some cases, may collect different types of information. If an entity is required to report beneficial ownership information to FinCEN, that requirement cannot be fulfilled by providing beneficial ownership information to a financial institution."
- "Are FinCEN and financial institutions collecting the exact same beneficial ownership information?" Answer: no. "FinCEN and financial institutions do not collect the exact same types of beneficial ownership information. For example, financial institutions are required to collect social security numbers of beneficial owners, but social security numbers are not required to be reported to FinCEN." The guidance provided a comparison chart on the different requirements.
FinCEN has been accepting beneficial ownership reports pursuant to the CTA since January 1, 2024.
Commentary
One of the original criticisms from business owners about the CTA was that it duplicated efforts because they already reported sensitive ownership and personal information to their financial institutions. While the reporting to financial institutions was considered a necessary evil because it went in exchange for receiving banking and other financial services, the new CTA report to the government seemed to benefit nobody. Business owners' concerns were temporarily assuaged with the idea that the CTA assigned "FinCEN number" could be used to streamline or replace their reporting to financial institutions and achieve a net benefit. As the CTA rules and guidance continue to develop, it appears business owners will be less than satisfied. And in the long run it may lead to more complicated information collection requirements for financial institutions, too.