Anti-money laundering [AML] regulations are nothing new. In fact, they have applied to financial institutions since the Bank Secrecy Act of 1970. The initial laws introduced important recordkeeping and reporting requirements but advances in technology have spurred more sophisticated schemes – and stricter regulations to combat them.
The latest push in the fight against financial crime came in the Corporate Transparency Act of 2021. This legislation empowered the Financial Crimes Enforcement Network [FinCEN] to capture data about the individuals who own a company. Once banks have access to the data, it will provide new ways to prevent money laundering and financial crimes. However, access to the data will come with its own set of challenges.
What is the Beneficial Ownership Information Registry?
The Beneficial Ownership Information [BOI] Registry is the name of the database FinCEN created to collect and store information about the people who own or control certain companies. The companies that are required to comply are those that are formed or registered to do business in the U.S. – known as “reporting companies.” The goal of the database is to centralize this data and make it available to certain groups who can prevent criminals from hiding ill-gotten gains through shell corporations or opaque ownership structures.
The database will contain four pieces of information about each beneficial owner and a control owner of a reporting company. These are:
- Name.
- Date of birth.
- Address.
- Identifying number and photo of driver’s license, passport, or other ID.
All reporting companies are required to provide BOI data to FinCEN, and the organization began collecting this information on January 1, 2024. Existing reporting companies have one year from that date to provide their data while newly formed or registered reporting companies have 90 days after the creation or registration of the company to file.
When will banks have access to the BOI database?
FinCEN is taking a phased approach to rollout of the new database which started with a pilot program for key federal agencies in February 2024. After the initial phase, Treasury offices, law enforcement agencies, and states will gain access to the database. Finally, financial institutions will be among the last groups to gain access.
Thus far, FinCEN has not provided a timeline for phases after the pilot program. While it isn’t clear when banks will be able to request information from the BOI database, there are steps that you can take now to ensure that your institution is ready.
What do banks need to do to obtain access?
To gain access to BOI information from the FinCEN database, banks will need to implement administrative, technical, and physical safety measures to protect the data. The required safeguards are based on Section 501 of Gramm-Leach-Bliley Act, so institutions that already comply with those measures have a head start.
In addition to data security measures, banks must put procedures in place for capturing and recording customer consent before making a request to FinCEN for BOI information. The method for obtaining and documenting consent is up to the bank’s discretion but they must retain the documentation for five years after account closure for which it made a BOI request.
How can banks use BOI information?
Once your bank gains access to the new FinCEN database, you will be able to request information about the owners of a reporting company, with their consent, to perform certain functions. Permissible uses of BOI information include:
- Due diligence.
- Complying with sanctions.
- Complying with requests, reviews, and investigations of anti-money laundering and terrorism financing rules.
On the other hand, your bank is not permitted to use BOI information for general business purposes like credit assessments and marketing. Additionally, your bank cannot disclose BOI information to any third party except federal regulators and certain employees who are subject to security and confidentiality requirements.
Access to the database isn’t required, but if your institution chooses to participate, you could gain information that will fill an important gap in current due diligence procedures. With this data, your organization can better understand your customers and prevent financial crime.
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