The Anti-Money Laundering Act of 2020 (AMLA 2020) requires FinCEN to implement and maintain a database to identify people who ultimately own or control legal entities (called ultimate beneficial owners, or UBOs). The requirement was designed to add transparency and address deficiencies in the U.S. anti-money laundering (AML) regime previously identified by the Financial Action Task Force. According to acting FinCEN Director Himamauli Das, “[f]or too long, it has been far too easy for criminals, Russian oligarchs, and other bad actors to fund their illicit activity by hiding and moving money through anonymous shell companies and other corporate structures right here in the United States.”
Two years in the making
We discussed the implications of beneficial ownership registry when AMLA 2020 was first released. Now, after almost two years, FinCEN published its final rule on September 29. The rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the US to report information about their UBOs to FinCEN.
- Reporting companies created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports.
- Reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports.
- Once the initial report has been filed, both existing and new reporting companies must file updates within 30 days of a change in their beneficial ownership information.
The rule also contains a list of those types of companies that are exempt from the reporting requirements.
But the work isn’t yet done. FinCEN must still: (1) establish protocols for who, why and how users can access UBO information, and (2) sync the existing laws regarding UBOs, with this new registry.
Why this matters: Both the government and financial institutions spend significant time and money to verify the legal entity ownership structure. This rule is the first step in simplifying and streamlining that process, and bringing much needed transparency to corporate structures.