Finalized Rule on Use of FinCEN Identifiers in the BOIR

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The Financial Crimes Enforcement Network (FinCEN) has recently announced the finalization of a rule that outlines the circumstances under which a reporting company may utilize an entity’s FinCEN identifier instead of providing information about individual beneficial owners.

What is a FinCEN Identifier in the BOIR?

A FinCEN identifier is a unique number issued by FinCEN upon request, following the submission of required information.Although obtaining a FinCEN identifier is not mandatory, it can significantly streamline the reporting process for entities and individuals, allowing them to provide required identifying information directly to FinCEN.The finalized rule, an amendment to FinCEN’s Beneficial Ownership Information (BOI) Reporting Rule, addresses concerns about the potential for reporting entity FinCEN identifiers to obscure the identities of beneficial owners, potentially leading to greater secrecy or incomplete and misleading disclosures.To address these concerns, the final rule establishes clear criteria that must be met for a reporting company to report an intermediate entity’s FinCEN identifier instead of individual beneficial owner information. The effective date of the final rule is set for January 1, 2024, aligning with the effective date of the BOI Reporting Rule.Specifically, the final rule applies to situations where another reporting company, let’s call it “the entity,” serves as a beneficial owner of another, “the reporting company.”In such cases, the reporting company is only required to report the entity’s FinCEN identifier and legal name in the beneficial owner section of their BOI report if the following conditions are met:

1. The entity has obtained a FinCEN identifier and provided it to the reporting company.
2. An individual is or may be a beneficial owner of the reporting company by virtue of an ownership interest in the reporting company held through the entity.
3. The beneficial owners of both the entity and the reporting company are the same individuals.

If all these conditions are not satisfied, the individual beneficial owners of the entity must be reported in their entirety in the BOI report.This new approach aims to balance the facilitation of reporting processes with the need for transparency in disclosing beneficial ownership information.

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