FinCEN’s New Rules for Reporting Beneficial Owners Create Opportunity for Whistleblowers

This article originally appeared in JD Supra.

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) is enacting new rules for January 1, 2024, requiring companies to report their beneficial owners to FinCEN. Violations of these new requirements can be reported to the FinCEN Whistleblower Office under the AML Whistleblower Law to qualify for a monetary whistleblower award.

These new regulations codify the 2021 Corporate Transparency Act, which aims to “make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures” by creating “a beneficial ownership information reporting requirement.” This information is important as Russian oligarchs have attempted to hide money through shell companies to evade U.S. sanctions after Russia invaded Ukraine.

These new regulations require reporting companies to identify themselves and to report each beneficial owner’s “name, birthdate, address, and a unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of such document).” A beneficial owner is, “with respect to an entity, an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise –exercises substantial control over the entity; or owns or controls not less than 25 percent of the ownership interests of the entity.” Domestic and foreign reporting companies that are in existence before January 1, 2024, must file their initial report by January 1, 2025, while domestic and foreign reporting companies created on or after January 1, 2024, must file a report within 30 calendar days of receiving or publishing notice of its creation. “Domestic reporting companies” refers to “a corporation, limited liability company (LLC), or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.” “Foreign reporting companies” refers to “a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office.” FinCEN will store this information in a “secure, non-public database” that can be used by federal agencies and regulators to better supervise financial institutions.

The rollout of these new rules creates an opportunity for FinCEN to enlist the assistance of whistleblowers in its fight against corruption. Individuals aware of a company misreporting its beneficial owner information in reports to FinCEN can confidentially and anonymously report these violations to the FinCEN Whistleblower Office. Qualified FinCEN Whistleblowers are entitled to receive between 10 and 30 percent of sanctions collected from original information voluntarily provided under the AML Whistleblower Law. Monetary awards to whistleblowers have proven to be a successful incentive for whistleblowers to assist law enforcement in uncovering corruption.