FinCEN Publishes Final Rule for the Use of FinCEN Identifiers to Report Beneficial Ownership Information of Entities

On November 8, 2023, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) published a final rule detailing when and how reporting companies can use another entity’s FinCEN identifier in place of reporting information on individual beneficial owners and corporate applicants (the “Final Rule”). The Final Rule amends FinCEN’s Beneficial Ownership Information Reporting Requirements Rule (the “BOI Rule”—see our MoFo Client Alert for additional information), which, effective January 1, 2024, will require most companies operating in the United States – subject to exceptions – to file beneficial ownership information with FinCEN.

The BOI Rule was designed to increase transparency in the U.S. financial system and to combat the use of shell companies in the United States to facilitate illicit financial activity, including money laundering and terrorist financing. The Final Rule makes clarifying changes to the BOI Rule to specify the circumstances in which an entity FinCEN identifier may be used.

FinCEN identifiers are unique identifying numbers. They may be issued upon request to individuals that have provided FinCEN with their beneficial ownership information (BOI) ‒ their name, address, date of birth, and Social Security number ‒ (“individual FinCEN identifier”), or to reporting companies that have filed initial BOI reports (“entity FinCEN identifier”). Although FinCEN identifiers are not required, they may simplify reporting for affected individuals and entities.

The Final Rule would permit reporting companies to submit another entity’s FinCEN identifier and full legal name in lieu of providing an individual’s BOI, if the following conditions are met:

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

In the preamble to the Final Rule, FinCEN warned that if there is a change in the beneficial owners of the reporting company or the other entity whose FinCEN identifier was used, the reporting company will have to file an update with FinCEN and can no longer use the other entity’s FinCEN identifier.

The BOI Rule and the Final Rule are both effective January 1, 2024. In anticipation of their implementation, FinCEN has announced the upcoming launch of a new hotline and chatbot to help answer questions about the new rules. On September 18, 2023, FinCEN also issued a Small Entity Compliance Guide to help small businesses comply with the rules and noted that additional guidance is forthcoming.