The Federal Crimes Enforcement Network (FinCEN) has issued proposed rules requiring certain entities to file reports with FinCEN. Comments to the proposed rules are due by February 7, 2022. The rules, if adopted, will implement Section 6403 of the Corporate Transparency Act (CTA), creating a governmental database containing certain personal information.

The rules would apply to corporations, LLCs, LPs, LLPs, LLLPs and the individuals who file for their formation. Twenty-three types of entities are exempt from filing, such as banks, credit unions, public utilities, tax-exempt organizations, and large operating companies.

The proposed rules describe who must file a report, what information must be provided, and when a report is due. The database will contain (i) the entity’s name, street address, state of formation, and taxpayer ID number, and (ii) personal information on individuals who exercise substantial control over the entity, including senior officers, or own 25% or more of the entity.

This information includes the individual’s full legal name, date of birth, current residential or business address, a photograph, and an identifying number such as a Social Security number, taxpayer identification number, or FinCEN number.

The database would be accessible by law enforcement agencies, U.S. financial institutions and limited federal governmental agencies. State and Tribal access would be by court authorization. Foreign governmental access also would be possible for special investigations.

The effective date for the rules is not yet known. Entities formed before the rule is effective will have one year to file. After the effective date, the report must be filed within 14 days after the entity is created. Updates for all entities must be filed within 30 days of any change.

There are many unknowns. As proposed, any individual who applies to create a legal entity is permanently included in the database as the applicant. The penalties for willfully filing false information or willfully failing to file include fines and possible imprisonment.

For more information or to submit comments, the Notice of Proposed Rule Making is available at https://www.federalregister.gov/documents/2021/12/08/2021-26548/beneficial-ownership-information-reporting-requirements.
 
If you have questions about how this may apply to your business, please contact one of Gust Rosenfeld’s Business/Corporate Law attorneys.