The Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury issued a final rule on September 29, 2022, implementing the bipartisan Corporate Transparency Act’s beneficial ownership information reporting provisions. What’s noteworthy is that FinCEN used this as an opportunity to expand the definition of beneficial ownership to include any individual who exercises substantial control over the reporting company.
FinCEN delineates numerous circumstances that indicate substantial control, all of which are very broad, essentially attempting to capture anyone making important decisions on behalf of a company. Read our analysis of the final rule.
While the change is currently limited to anti-money laundering enforcement, given the increased coordination among regulatory agencies, including enforcement authorities, it would not be unreasonable to conclude that the new FinCEN rule will influence other regulators to incorporate similar standards in the trade compliance field, where ultimate beneficial ownership (UBO) can be crucial to establishing the bona fides of the parties with whom one is dealing.
It could also result in the need to consider these expanded standards in the Committee on Foreign Investment in the United States (CFIUS) process, where the Committee looks to UBO as a factor for mitigation, approval, or denial of a covered transaction. In any circumstance, the expanded definition of beneficial ownership, if incorporated into the trade and/or CFIUS space, could result in new diligence and record requirements.
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