New regulations are set to come into effect in the US, requiring businesses to submit personal identification documents to the federal government to aid in the prevention of money laundering. Under the Corporate Transparency Act, passed as part of the Anti-Money Laundering Act in the National Defense Authorisation Act for Fiscal Year 2021, a federal database containing personal and business information will be created. The database will be used to store information about who owns and operates legal entities within the United States.
The Financial Crimes Enforcement Network (FinCEN) will oversee the regulations, requiring all ‘reporting companies’ to submit a beneficial owner information report (BOI) that identifies the beneficial owners of a reporting company, providing their full legal name, date of birth, and current residential or business address, and a unique identifying number from an acceptable identification document such as a passport or driver's licence. The BOI must also include an image of the identification document.
The BOI must be filed by all domestic reporting companies, which include ‘corporations, limited liability companies, and any other entity created by the filing of a document with a Secretary of State or similar office under the law of a state or Indian tribe,’ and foreign reporting companies. The latter includes corporations, limited liability companies, or other entities formed under the law of a foreign country that is registered to do business in the United States.
Exemptions to the regulations apply to tax-exempt entities, units of government, banks, money services businesses, brokers, or dealers in securities, and accounting firms. Additionally, publicly traded companies issuing registered securities and large operating companies are excluded.
The regulations become effective on 1 January 2024, with a one-year grace period for companies created or registered before that date to file initial reports. Companies created or registered after 1 January 2024, will have only 30 days after receiving notice of their creation or registration to file their initial reports. Reporting companies are given 30 days to report changes to information in previously filed reports and must correct inaccurate information within 30 days of discovering the inaccuracy.
While the regulations aim to prevent money laundering, some businesses may be concerned about the security of personal identification documents submitted to the federal government. However, proponents of the regulations argue that it is a necessary measure to prevent illegal activities and will ultimately benefit the business community by providing a more transparent and trustworthy environment.
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