Changes Coming to Beneficial Ownership

We’ve been hearing for a while now that changes were coming to Beneficial Ownership.  The process has started, but will not be effective immediately, and of the three new final rules to be issued, the third rule will be the one that has the most impact on financial institutions.  The first of the final rules to change the beneficial ownership requirements has been published.

How did we get here?

Section 6403 of the Corporate Transparency Act (CTA), enacted as part of the National Defense Authorization Act for Fiscal Year 2021 (NDAA), requires three things of the Financial Crimes Enforcement Network (FinCEN): 1) establish a database for beneficial ownership information, 2) establish rules for access to disclosure of beneficial ownership information, and 3) revise the existing customer due diligence (CDD) requirements for financial institutions.  The current CDD rule has, since 2018, required that financial institutions collect information from legal entity customers regarding the beneficial owners of the legal entity customer.

Where are we now?

Of FinCEN’s three requirements in Section 6403 of the CTA, we’re on step one of three.  In December 2021 FinCEN published a notice of proposed rulemaking (NPRM) related to establishing a database for beneficial ownership information.  Just recently FinCEN published the final rule related to establishing a database for beneficial ownership information.  At the heart of this final rule is the requirement for corporations, limited liability companies, and entities created by the filing of a document with the Secretary of State’s office to provide beneficial ownership information directly to FinCEN.  As part of establishing a database for beneficial ownership information, this rule also describes what information is required to be filed, along with the dates by which action must be taken.  This final rule is effective January 1, 2024.

What’s next?

Because this first final rule implementing Section 6403 isn’t effective until January 2024, presumably the next step would be for FinCEN to publish a notice of proposed rulemaking either related to the access of the database which houses beneficial ownership information, or a revision of the CDD requirements for financial institutions.  It’s this latter rule that financial institutions are most anxiously awaiting, as that should signal a change in information collection requirements for banks.  It is anticipated that banks will be collecting less information after the effective date of the final rule that revises the CDD requirements, so it’s no wonder that institutions are feverishly awaiting these revisions.


Compliance Alliance published a summary of the 2021 NPRM earlier this year.  A summary of the final rule is pending and will be uploaded to our website as soon as it is available.  If you have any questions about the final rule in the meantime, reach out to us on the hotline.