"Treasury Issues Final Beneficial Ownership Reporting Rules," Law360

On Thursday, the U.S. Treasury Department's financial crimes unit issued final regulations that largely retain the overall framework of proposed guidance that aims to shine a light on shell companies by requiring businesses to report information about so-called beneficial owners.

Taylor English partner Jonathan Wilson discussed key takeaways from the final regulations with Law360's Natalie Olivo. 

The final rules, which are effective January 2024, generally keep the broad definition of a company's beneficial owner, which was first outlined in regulations proposed in late 2021 by the Financial Crimes Enforcement Network. Under the final regulations businesses must submit beneficial ownership information that FinCEN will use to create a national database that would help target tax evasion, money laundering and other crimes carried out through shell companies.

Under the final rules' approach to substantial control, the definition of beneficial owner will include limited liability company members with the ability to vote on major decisions. According to Wilson, "This structure is common among LLCs, and companies should therefore not assume that the ownership threshold is at 25%." He added that this is a very dangerous misunderstanding. 

The final regulations also include a handful of changes. 

"These changes mean that a newly formed company, after [Jan. 1, 2024] is going to have to pull together all the information for its beneficial ownership report and also get its TIN done within that 30 calendar day window, said Wilson.

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