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Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules the reporting requirement after the filing of its initial report. One commenter noted it is important to avoid ambiguity as to whether a change in information superseded by subsequent changes within the 30-calendar-day window must be reported. That is to say, if a reporting company has a change in substantial control that triggers the 30calendar-day window e.g., Individual A
becomes a beneficial owner because they exercise substantial control over the reporting company, and then another change in substantial control within the 30-calendar-day window i.e., Individual A ceases to exercise substantial control over the reporting company, is the reporting company obliged to report anything about Individual A? In this situation, the proposed rule would require two separate reports from the reporting company, noting the addition and then the removal of Individual A as a beneficial owner. The first report would be due within 30 calendar days of Individual A gaining substantial control over the reporting company; the second report would be due within 30 days of Individual A ceasing to exercise substantial control over the reporting company.
FinCEN considers that keeping the database current and accurate is essential to keeping it highly useful, and that allowing reporting companies to delay mandatory updates by more than 30 daysor allowing them to report updates on an annual basiscould cause a significant degradation in accuracy and usefulness of the BOI.
FinCEN also believes that a 30-calendarday deadline is necessary to limit the possible abuse of shelf companiesi.e., entities formed as generic corporations without assets and then effectively assigned to new owners. The longer updates are delayed, the longer a shelf company can be off the shelf without notice to law enforcement of the companys new beneficial owners, and without any notice to financial institutions that they should scrutinize transactions involving the company from the perspective of its new beneficial owners. FinCEN has considered the costs of the compliance burden that the 30-calendar-day timeframe may place on reporting companies in the regulatory analysis in Section VI below. To minimize those costs while ensuring that the database be highly useful, and also recognizing that this requirement is not based on when a reporting company knows or has reason to know that information in a prior report has changed, FinCEN
proposes allowing 30 days for such
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filings, as opposed to the 14 calendar days provided for the correction of inaccurate reports. FinCEN believes the 30 day timeframe is sufficient time for a reporting company to identify and report updates to the information previously submitted to FinCEN.
FinCEN recognizes that several commenters recommended a 180-day or 1-year period to allow updates of reports, and some suggested that FinCEN only use a shorter period for changes in beneficial owners while retaining a longer period for changes in the information reported about a particular beneficial owner. FinCEN
selected a 30-calendar-day deadline rather than a longer deadline to update reports in an effort to consider both the burden on reporting companies and the desire of both law enforcement and financial institutions to have a database that is as up-to-date as possible.
The CTA further requires Treasury to conduct a review, in consultation with the Attorney General and the Secretary of Homeland Security, to evaluate the timing of updates to reports against the backdrop of benefits to law enforcement and burdens to filers.154 FinCEN thus solicits comments on the burdens that the requirement to correct inaccurate information within 14 days and to update changed information within 30
days would impose on reporting companies, on the degree to which the accuracy and usefulness of the database depend upon prompt updates, and on any other relevant topics regarding the proposed rules approach to changes or updates to a reporting companys reportable information.
Proposed 31 CFR 1010.380a2i provides that if a reporting company becomes exempt after filing an initial report, this change will be deemed a change requiring an updated report. The CTA does not expressly require a reporting company to file a report indicating that it has become exempt.
Nevertheless, FinCEN believes the authority to require such a report is implicit in the CTA. As explained above, the express requirement in 31
U.S.C. 5336b2A to identify beneficial owners and applicants for each reporting company implies a requirement to identify the associated company. It likewise implies a requirement that the company identify itself as a reporting company. This implied representation that a company reporting its beneficial owners is in fact a reporting company is therefore among the information that 31 U.S.C.
5336b2A requires to be reported, albeit implicitly. And when there is a 154 See
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change with respect to any such information, 31 U.S.C. 5336b1D
requires a report that updates the information relating to the change.
FinCEN thus believes that it is consistent with the CTA to require a reporting company to file a report indicating that it has become exempt.
Having notice that an entity that was a reporting company subsequently became eligible for an exemption to the definition of a reporting company will help FinCEN preserve enforcement resources by allowing it to focus on reporting companies that failed to report, rather than on entities that had previously filed reports but that became exempt from the requirement.
Proposed 31 CFR 1010.380a2ii provides that if an individual is a beneficial owner of a reporting company because the individual owns at least 25
percent of the ownership interests of the reporting company, and such beneficial owner dies, a change with respect to the required information will be deemed to occur when the estate of a deceased beneficial owner is settled. This proposed rule is intended to clarify that a reporting company is not required to file an updated report to notify FinCEN
of the death of a beneficial owner.
However, when the estate of a deceased beneficial owner is settled either through the operation of the intestacy laws of a jurisdiction within the United States or a testamentary deposition, the reporting company is required to file an updated report removing the deceased former beneficial owner and, to the extent appropriate, identifying any new beneficial owners. Moreover, the other provisions of proposed 31 CFR
1010.380b1 and d would still applynamely, that the reporting company would be required to report any beneficial owner who meets the substantial control or ownership components of the proposed rule as a result of another beneficial owners death. This proposed rule is intended promote efficiency and limit the burden on reporting companies by reducing the number of updates that a reporting company must file in the event of the death of a beneficial owner.
As noted above, FinCEN is still developing reporting protocols and relevant forms, and is not proposing a final format or mechanism of reporting at this time. FinCEN will prescribe the forms and instructions for filing the required reports, consistent with the final rules. Reporting companies will not have to submit their own letters to report information to FinCEN.

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