What Does the New BOI Reporting Rule Mean for Banks?
By Scott Birrenkott
As of January 1 of this year, many companies must report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) (referred to as the BOI reporting rule) as part of implementation of the Corporate Transparency Act (CTA). Reporting companies include most corporations, limited liability companies, or others created by the filing of documents with Wisconsin. This information must be reported directly to FinCEN through its online reporting portal. The Wisconsin Bankers Association is often asked: what does this mean for banks? For example, are banks required to ensure their customers report accurate information? In some respects, the answer is this rule doesn’t mean anything for banks. There’s a little more to the conversation than that, though.
When talking about the new BOI reporting rule, it’s important to make a distinction from FinCEN’s other reporting rule: the Customer Due Diligence (CDD) rule. The CDD rule became effective in 2018 and requires banks to identify and verify the identity of beneficial owners of legal entity customers. In short, it requires banks to collect a certification of beneficial ownership for certain companies. The CDD rule and BOI reporting rule are separate. The CDD rule has not changed since 2018, and the BOI reporting rule places no additional obligations upon banks. Meaning banks are not required to ensure their customers report under the BOI rule or verify the accuracy of that information. However, banks must continue to meet the requirements of the CDD rule.
Thus, if customers have questions regarding their BOI reporting requirements, they should be directed to FinCEN for further information. FinCEN maintains a variety of helpful resources on its website to help companies understand who must report, what they must report, when, and how. Additionally, WBA has created resources for banks to further understand the differences between the rules, as well as customer facing resources to better help banks work with companies who might have questions for them. These resources can be found on the WBA website.
Lastly, there is a third rule worth discussing as part of this conversation. As mentioned at the beginning of this article, the BOI reporting rule is part of FinCEN’s efforts to implement requirements mandated by the CTA. As part of this implementation, FinCEN issued a third rule in 2022, in addition to those discussed above, often referred to as the Access Rule. The Access Rule prescribes the circumstances under which BOI reported to FinCEN may be disclosed to authorized BOI recipients, and how it must be protected. The Access Rule does not create a new regulatory requirement for banks to access BOI from the system or a supervisory expectation that they do so. The prudential federal regulatory agencies issued joint guidance in December of 2023 stating this fact.