FinCEN proposed a critical rule on December 21, 2023, detailing who can access the forthcoming Beneficial Ownership Information (BOI) database, as required under the Corporate Transparency Act (CTA). The proposal outlines access tiers for federal and state law enforcement, financial institutions, and regulatory bodies, while seeking to balance transparency with privacy and data protection.

Financial institutions would be granted access to BOI only for Customer Due Diligence (CDD) purposes, and only after receiving customer consent. This caveat raised concerns among compliance professionals about the practical utility of the database. Critics argue that requiring consent undermines the purpose of the registry and could limit its effectiveness in combating illicit finance.

Nonetheless, the rule represents a major step forward in U.S. efforts to unmask shell companies and improve financial transparency. Access protocols will be critical to maintaining data security while ensuring that compliance teams have actionable intelligence. The proposal also includes robust audit and reporting requirements to monitor the use of BOI data.

Compliance officers should monitor the finalization of the rule and prepare internal policies to align with its requirements. Institutions should also ensure they have procedures for obtaining customer consent and verifying the accuracy of BOI data. As the registry becomes operational, it will serve as a powerful tool in identifying hidden ownership structures and mitigating AML risks.

Source: FinCEN Issues Final Rule Regarding Access to Beneficial Ownership Information
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