FinCEN Issues Final Beneficial Ownership Rule

On September 22, 2022, the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury issued a final rule (the “Rule”) under the Anti-Money Laundering Act and the Corporate Transparency Act. The Rule requires certain entities to report beneficial ownership. “Reporting Companies” are (i) domestic entities created by filing with a state secretary of state or similar and (ii) “foreign reporting companies”, such as an entity registered in a foreign jurisdiction and authorized to do business in a domestic jurisdiction, in each case not otherwise exempt (such as banks and “large operating companies”, the latter effectively those with at least 20 full-time U.S. employees, a physical U.S. presence and $5 million in sales last year). If the company is a Reporting Company, it must report beneficial owners, which includes for example individuals with at least 25% ownership or control or “substantial control”, such as serving as a senior officer, having the ability to appoint or remove a senior officer or a majority of the board, directing or having substantial influence over decisions made by reporting companies, or having other substantial control over a reporting company. The Rule will be effective January 1, 2024, but reporting companies in effect at that time will have another year to file beneficial owner information. The new Rule is expected to improve U.S. knowledge of beneficial ownership of entities, and therefore assist in determining catching international money laundering, but it is not known yet how much it will help. At the same time, on October 26, 2022, FinCEN has also extended by 6-months its Geographic Targeting Orders (“GTOs”) to April 24, 2023, under which U.S. title insurance companies in certain cities must report beneficial ownership of residential real estate purchased without financing – basically for cash – for at least $300,000, except in Baltimore where the threshold is $50,000. The urban areas are: Boston; Chicago; Dallas-Fort Worth; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; Seattle, the District of Columbia, Northern Virginia, and Maryland (DMV) area; as well as the City and County of Baltimore, the County of Fairfield, Connecticut, and the Hawaiian islands of Honolulu, Maui, Hawaii, and Kauai; and expansion to the counties of Houston and Laredo.