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Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules
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company with a secretary of state or similar office in the United States.
The proposed definition of a company applicant would also include any individual who directs or controls the filing of such a document by another person. This additional requirement is designed to ensure that the reporting company provides information on individuals that are responsible for the decision to form a reporting company given that, in many cases, the company applicant may be an employee of a business formation service or law firm, or an associate, agent, or family member who is filing the document on behalf of another individual. In such a case, the individual directing or controlling the formation of a legal entity should not be able to remain anonymous simply by directing another individual to file the requisite paperwork, and must therefore disclose his or her identity to FinCEN
along with the individual that made the filing. FinCEN believes that this additional information about the person directing or controlling the formation or registration of the reporting company will be highly useful to law enforcement, which may be able to draw connections between and among seemingly unrelated reporting companies, beneficial owners, and company applicants based on this additional information. In addition, FinCEN believes that it will be better positioned to investigate the submission of inaccurate BOI if it is able to identify both the individual who submitted the report and the person who directed or controlled that activity. It may also give a company applicant executing the filing an incentive to reasonably satisfy himself or herself that the BOI being submitted to FinCEN at the direction of another is accurate because they could also be held accountable, thereby improving data quality. FinCEN believes that the burden of this reporting requirement is minimal because the identity of any individual that meets the definition of company applicant both the person submitting the report and the person directing itshould be readily available to reporting companies. FinCEN welcomes comments on this proposal.
D. Reporting Company The CTA defines a reporting company as a corporation, limited liability company, or other similar entity that is either 1 created by the filing of a document with a secretary of state or a similar office under the law of a State or Indian Tribe; or 2 formed under the law of a foreign country and registered to do business in the United States by the filing of a document with
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a secretary of state or a similar office under the laws of a State or Indian Tribe. 122
To facilitate application of the statutory definition of reporting company, proposed 31 CFR
1010.380c1 defines two new terms:
Domestic reporting company and foreign reporting company.
i. Domestic Reporting Company Consistent with the CTAs statutory language, FinCEN proposes to define a domestic reporting company to include:
1 A corporation; 2 a limited liability company; or 3 other entity that is created by the filing of a document with a secretary of state or a similar office under the law of a state or Indian Tribe.123 Because corporate formation is governed by state or Tribal law, and because the CTA does not provide independent definitions of the terms corporation and limited liability company, FinCEN intends to interpret these terms by reference to the governing law of the domestic jurisdiction in which a reporting company that is a corporation or limited liability company is formed. For clarity and ease of administration, the proposed rule defines reporting company to include all domestic corporations and limited liability companies based on FinCENs understanding that all corporations and limited liability companies are created by the filing of a document with a secretary of state or a similar office under the law of a state or Indian Tribe.
FinCEN, however, invites comment on whether this understanding is accurate.124
The proposed rule does not separately define the statutory clause other similar entity, but rather reflects FinCENs interpretation of other 122 31

U.S.C. 5336a11Aiii.
U.S.C. 5336a11Aiii.
124 A 2016 World Bank guide to beneficial ownership information in the United States notes that the actual mechanics of creating a corporation or limited liability company may vary slightly from state to state, but are generally very similar.
Specifically, the guide notes that for corporations, every state requires the filing of a corporate governance document called the articles of incorporation, certificate of incorporation, or charter with the state filing office, together with the payment of a filing fee. It further states that for limited liability companies. . . every state requires the filing of an organization document generally called a certificate of organization, certificate of formation, or articles of organization which constitutes proof of its organization, form, and existence. World Bank G
20 Anti-Corruption Working Group, Guide to Beneficial Ownership Information: Legal Entities and Legal Arrangements United States 2016, p.
3, available at https star.worldbank.org/resources/
beneficial-ownership-guide-united-states-america2016. accessed on November 1, 2021.
123 31

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similar entity as referring to any entity that is created by the filing of a document with a secretary of state or similar office, the only common characteristic the statute identifies.
FinCEN considered alternative approaches when determining how to interpret similar entity, but those alternatives do not appear to accord with Congresss objective of enabling law enforcement and others to counter illicit activity conducted through such entities, or are otherwise unworkable.125
For example, FinCEN considered defining similar entity narrowly to include entities that limit their owners personal liability under state or Indian Tribe law, but it is not clear how this limitation would align with the purpose of the statute because legal entities can be used by malign actors to further or hide illicit activity regardless of whether they enjoy limited liability.
Alternatively, similar entity might be defined somewhat more broadly to include entities that are legally distinct from their natural person owners, but this definition would depend on varying state law and could be difficult to apply.
Moreover, any approach that unduly narrows the scope of the reporting company definition could exclude entities that malign actors can use to obscure their true ownership or control structures, thereby limiting the usefulness of the reported information for law enforcement, tax authorities, and other stakeholders. In passing the CTA, Congress was concerned with entities that can be created without needing to report who their beneficial owners are.126 And Congress was aware that malign actors take advantage of these entities to conceal their involvement in illicit activity.127 As explained above, this creates a significant hurdle for investigators who are forced to use timeconsuming and resource-intensive tools to try to obtain this information, if it can be obtained at all. An unduly narrow interpretation of similar entity could therefore impede a key objective of the CTA. Thus, FinCEN proposes to focus on the act of filing to create the entity as the determinative factor in defining entities besides corporations and limited liability companies that are also reporting companies. FinCEN welcomes comments on this approach.
In general, FinCEN believes the proposed definition of domestic reporting company would likely include limited liability partnerships, limited liability limited partnerships, business trusts a/k/a statutory trusts or 125 CTA,
Section 64025D.
Section 64022.
127 CTA, Section 640234.
126 CTA,
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