The US Treasury’s Financial Crimes Enforcement Network (FinCEN) published notices on January 17 seeking public comment on two proposals: (1) the application document that individuals would use to obtain a FinCEN identifier (FinCEN Identifier Notice) and (2) the mechanism that FinCEN would use to collect beneficial ownership information (BOI) from reporting companies (BOI Collection Notice) (collectively, the Notices). The Notices are part of FinCEN’s further implementation of BOI reporting requirements under the Corporate Transparency Act.
As discussed in our prior report, on September 30, 2022, FinCEN published a final rule establishing BOI reporting requirements pursuant to the Corporate Transparency Act whereby most corporations, limited liability companies, and other similar entities created in or registered to do business in the United States must report their beneficial ownership information to FinCEN (Final Rule).
FinCEN will accept comments on the Notices until March 20, 2023.
Under the Final Rule, certain legal entities must file reports with FinCEN identifying the beneficial owners and company applicant of the entity. In some circumstances, a reporting company may provide a “FinCEN identifier,” or unique identifying number assigned by FinCEN to a beneficial owner or company applicant, in lieu of the entire set of data pertaining to beneficial owners and company applicants that reporting companies are otherwise required to report to FinCEN. Obtaining a FinCEN identifier is voluntary. To obtain one, individuals must submit applications to FinCEN electronically that contain certain information about themselves and must update that information as needed. [1] FinCEN will store the information provided in its BOI database for access by authorized users.
According to the FinCEN Identifier Notice, the primary reasons that individuals may seek FinCEN identifiers are for (1) data security purposes, where an individual would prefer to submit their personal data directly to FinCEN rather than indirectly through the reporting company and (2) administrative efficiency, where an individual is likely to be identified as the beneficial owner or company applicant of numerous reporting companies. FinCEN expects the number of individuals who apply for a FinCEN identifier to be relatively low.
The application will be available to persons who have obtained accounts at, and logged in through, login.gov. FinCEN expects the application to require about 20 minutes to complete.
The data required by the proposed application include the individual’s:
The proposed application also requires applicants to certify that the information furnished is true and complete.
Reporting companies subject to the Final Rule must report identifying information about their beneficial owners and company applicant, as well as information about the entity itself, to FinCEN. In addition, the Final Rule requires reporting companies to update the information reported as needed and correct any previous incorrectly reported information. The reports must be filed electronically through an online interface. FinCEN will maintain the information collected and make it accessible to authorized users. The BOI Collection Notice requests comment on the form that FinCEN will use to collect this information.
FinCEN expects that for reporting companies with simple beneficial ownership structures, it will require about 90 minutes to complete the report, and about 40 minutes to update existing reports. FinCEN notes that the costs for filing initial BOI reports will vary depending on the complexity of a reporting company’s structure and estimates a range of costs associated with filing an initial BOI report. FinCEN estimates the average cost of filing an initial BOI report per reporting company to range from $85.14 for entities with simple beneficial ownership structures, and up to $2,614.87 for entities with complex beneficial ownership structures. FinCEN estimates that the average cost of filing an updated BOI report will range between $37.84 to $560.81.
The data required by the proposed application include:
As noted above, FinCEN will accept comments on the Notices until March 20, 2023.
FinCEN invites comments on: (1) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (2) the accuracy of the agency’s estimate of the burden of the collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; (4) ways to minimize the burden of the collection of information on respondents, including through the use of technology; and (5) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services required to provide information. All comments will become a matter of public record.
While the Notices are procedural rather than substantive in nature, impacted parties may want to consider commenting on whether FinCEN has adequately considered the costs and time commitments associated with the proposed FinCEN identifier application and BOI collection mechanism. In addition, impacted parties may want to consider commenting on any burdens associated with using FinCEN’s interfaces and whether any alternatives exist.
If you would like assistance with the preparation of a comment letter or more information on the issues discussed in this LawFlash, please contact any of the following:
[1] Entities will not use the proposed application to obtain a FinCEN identifier and instead will request a FinCEN identifier when they submit a BOI report, as discussed in the BOI Collection Notice.