Updated FAQs on beneficial ownership information (BOI) from Treasury's Financial Crimes Enforcement Network (FinCEN) include details on the timing of the phase in of access to BOI under Section 6403 of the Corporate Transparency Act (CTA), P.L. 116-283.

In the updated FAQs posted Thursday, FinCEN added a new section on BOI access, a subject that Congress focused on when Director Andrea Gacki testified in February before the House Financial Services Committee.

Access will be phased in, beginning this spring with a pilot program for some federal agency users and concluding in spring 2025, when financial institutions with customer due-diligence requirements will be able to review BOI.

In between, in summer of 2024, access will be granted to Treasury offices and other federal agencies engaged in law enforcement and national security activities that already have memoranda of understanding for access to BSA information and in the fall of 2024 to additional federal agencies engaged in law enforcement, national security, and intelligence activities.

In the winter of 2024, FinCEN will extend access to intermediary federal agencies in connection with foreign government requests. Finally, in the spring of 2025, access will be extended to financial institutions subject to customer due diligence requirements under applicable law and their supervisors.

FinCEN, which administers the CTA, is not accepting access requests now; it will provide further guidance on how to request access in the future, the FAQs said.

When Gacki testified before the House committee, she said the BOI database was "established with the highest level of security for a nonclassified system, set to federal standards, the FISMA (Federal Information Security Modernization Act) standards."

FinCEN also has standards for anyone authorized to access BOI and will ensure that the information is being accessed only for purposes allowed under the CTA, she said.

FinCEN issued an 82-page final rule on access (RIN 1506-AB59) in December 2023 without details on the timing of the access other than it would be taking a phased in approach to providing access that would begin in 2024.

The updated FAQs address other issues, including the definition of a beneficial owner. FinCEN said trusts, corporations, or other legal entities are not considered beneficial owners, although information about an entity may be used instead of information about a beneficial owner in specific circumstances. It refers to question D.12, added in January 2024, to explain those circumstances.

Previously, FinCEN defined a beneficial owner as an "individual who either directly or indirectly: (1) exercises substantial control over a reporting company … or (2) owns or controls at least 25% of a reporting company's ownership interests …" That language remains in the updated FAQs.

Other issues in the updated FAQs include beneficial ownership through trusts and the applicability of BOI reporting requirements to S corporations and homeowners associations.

Under the CTA, which Congress passed in 2021 as an anti-money-laundering initiative, reporting companies must disclose the identity and information about beneficial owners of the entities. For new entities incorporated after Jan. 1, 2024, reporting companies must also disclose the identity of "applicants" — defined as any individual who files an application to form a corporation, LLC, or other similar entity.

Reporting companies are required to provide information about both the companies and their beneficial owners and applicants, including full legal name, address, state or tribal jurisdiction of formation, IRS taxpayer identification number, birth date, and other details. Willful violations are punishable by a fine of $591 a day, up to $10,000, and two years in prison with similarly serious penalties for unauthorized disclosure.

BOI reporting requirements are on hold for members of the National Small Business Association and an Alabama businessman, who won a summary judgment in March in their lawsuit over the CTA. FinCEN has said the requirements still apply to all other businesses who must report.

FinCEN estimates that BOI reporting regulations apply to 32.6 million entities with 5 million added each year through 2034.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.