The Beneficial Owners Behind the Veil of U.S. Publicly Hidden Structures

In recent years, there has been a growing trend of wealthy individuals worldwide transferring their assets to the United States. One of the primary reasons for this is the high level of secrecy provided by U.S. structures (such as trusts), which makes it nearly impossible to identify the beneficial owners (i.e., the actual controllers) of these structures through public records. In some cases, even the U.S. government, including the IRS, may not know who is behind these structures. This has made the U.S. a highly popular destination for hiding assets in recent years.

However, in 2021, the U.S. passed the Corporate Transparency Act (CTA), aiming to collect information on the beneficial owners of such hidden structures to combat illegal activities such as tax fraud, money laundering, and terrorist financing. The Act officially came into effect on January 1, 2024.

On December 21, 2023, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued its Final Rule Regarding Access to Beneficial Ownership Information (“Final Rule”), which establishes a framework for the access, sharing, and protection of beneficial ownership information. This rule outlines the conditions under which beneficial ownership information can be disclosed and shared with U.S. federal agencies, state, local, tribal, and foreign governments (pay attention here), as well as financial institutions, in compliance with FinCEN’s Final Beneficial Ownership Reporting Rule issued on September 30, 2022. The Final Rule will take effect on February 20, 2024, and will be implemented in phases. It is the second of three key rulemakings planned under the implementation of the Corporate Transparency Act.

FinCEN Director Andrea Gacki stated:

“This final rule is an important step forward in protecting the financial system and curbing illicit activity. Beneficial ownership information can provide critical insights to law enforcement, intelligence, and national security professionals to help safeguard the U.S. from bad actors who exploit anonymous shell companies for money laundering, corruption, sanctions evasion, tax evasion, drug trafficking, fraud, and many other criminal offenses that go unpunished—while legitimate businesses suffer from their misconduct.”

The first rulemaking mentioned above, the Reporting Rule, also took effect on January 1, 2024. This rule requires certain corporations, limited liability companies, and other similar entities created or registered in the U.S. to report information about their beneficial owners to FinCEN. FinCEN has already launched its BOI IT System, which securely collects, processes, and stores this information. A third rulemaking is expected in the future to amend customer due diligence rules.

In this article, we’ll explore how the U.S. plans to share beneficial ownership information and exactly what information will be shared.