Risk Management » Beneficial Ownership Rules In Effect

Beneficial Ownership Rules In Effect


March 9, 2023

In September 2022 the Financial Crimes Enforcement Network (FinCEN) issued its final rule implementing reporting requirements for beneficial ownership information. The Rule implements Section 6403 of the Corporate Transparency Act. It requires most companies located or doing business in the U.S. to disclose their beneficial owners to FinCEN. The Rule is intended to assist in preventing money laundering, terrorist financing, corruption, tax fraud, and other crimes committed using companies with opaque ownership structures by providing a centralized database of beneficial ownership. Beneficial owners are defined as individuals who directly or indirectly either exercise substantial control over a reporting company, or own or control at least 25 percent of the ownership interests of the company. Anyone who serves as a senior officer, has authority to appoint or remove a senior officer or a majority of the board of directors, or who directs, determines, or has substantial influence over, important matters affecting a reporting company has “substantial control,” according to the rule. It requires submission of information for the company itself and or each beneficial owner. The potential liability for failing to comply can be a civil penalty of up to $500 for each day that the violation continues or has not been remedied up to $10,000. Individuals face up to two years in prison.

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