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Financial Crimes Enforcement Network of the Department of Treasury (“FinCEN”) Issues Notice of Proposed Rulemaking on Access and Safeguards for Beneficial Ownership Information

January 19, 2023

By Robert J. Waine, Esquire

On September 29, 2022, FinCEN issued a final rule implementing the Corporate Transparency Act (“CTA”), 31 U.S.C.S. § 5336. The purpose of the CTA is to help fight corruption by requiring “reporting companies” to file beneficial ownership information (“BOI”) with FinCEN. On December 15, 2022, FinCEN issued a Notice of Proposed Rulemaking proposing regulations that will establish who may access the BOI once it is reported beginning January 1, 2024, and how the information will be safeguarded. The CTA authorizes FinCEN to disclose BOI to five general categories of recipients under specific circumstances. Under the proposed rules, FinCEN could disclosed BOI to the following recipients:

  1. FinCEN could disclose BOI:
    1. To Federal agencies engaged in national security, intelligence, or law enforcement activities if the requested BOI is for use in furtherance of that activity. Authorized users from qualifying Federal agencies will be able to log directly into a beneficial ownership IT system to run queries and review results. Users will have to submit justifications to FinCEN for their searches, which will be subject to oversight and audit. The beneficial ownership IT system will be designed to meet the highest Federal Information Security Management Act (FISMA) level – FISMA High.
    2. To state, local, and Tribal law enforcement agencies if a court of competent jurisdiction has authorized the law enforcement agency to seek the information in a criminal or civil investigation. Authorized users from these agencies will be required to upload a document issued by a court authorizing the agency to seek BOI from FinCEN. Once FinCEN has reviewed the relevant authorization and approved the request, the agency could then conduct searched within the beneficial ownership IT system.
  1. To foreign requestors, who are required to make their request for BOI through an intermediary Federal agency. The foreign request would have to be made either (1) under an international treaty, agreement, or convention or (2) via a request made by law enforcement, judicial, or prosecutorial authorities in a trusted foreign country. When no treaty or agreement exists, FinCEN would look to U.S. interests and priorities in consultation with relevant U.S. government agencies when determining whether to disclose BOI to the foreign requestor. In either case, the foreign requestor would not have access to the beneficial ownership IT system and would rely on the Federal agency through which the request was routed to furnish them with the requested BOI.
  2. To financial institutions for purposes of complying with customer due diligence requirements, but only with the consent of the reporting company to which the BOI pertains.
  3. To Federal functional regulators and other appropriate regulatory agencies that can request BOI that the financial institutions they supervise have already obtained for purposes of assessing a financial institution’s compliance with customer due diligence requirements.
  4. To any U.S. Department of Treasury officer or employee (1) whose official duties require BOI inspection or disclosure or (2) for tax administration. The Treasury Department is supposed to establish internal policies and procedures governing Treasury officer and employee access to BOI.

Written comments on the proposed rule may be submitted to FinCEN on or before February 14, 2023. This proposed rule is the second of three rulemakings planned to implement the CTA. The first rulemaking was the BOI Reporting Rule that was finalized on September 30, 2022. The third rulemaking will revise FinCEN’s customer due diligence rule no later than one year after the effective date of the BOI Reporting Rule (January 1, 2024).

If you would like to learn more about the CTA and the reporting requirements, or other assistance with your company, the attorneys at Rothman Gordon P.C. are ready to assist.  Please contact us online or call (412) 338-1169.

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