Enhanced Transparency and The Arrival of the BO IT Database

by Jessie Southworth, KBA Director of Education

Along with the new year, 2024 has ushered in the Financial Crimes Enforcement Network (FinCEN)’s new database: the Beneficial Ownership Information Technology System (BO IT). As part of administering compliance with the AML Act of 2020, legal entities are now required to report beneficial ownership information federally to FinCEN. Prior to January 1, 2024, beneficial ownership information was collected when an entity became a customer at a financial institution. Prior to the database, beneficial ownership information was gathered and housed at each individual financial institution.

What the BO IT database achieved is the ability to bring all beneficial ownership information together in one place. Company A that is based out of California, that is 26 percent owned by an individual who owns Company B in Kentucky, can be tied together with Company B to reflect that they are significantly owned by the same individual. The database is a successful step to pierce the corporate veil in identifying shell companies to better fight financial crimes.

While this database is a useful tool for law enforcement and the federal government in their efforts to tackle the ever-evolving fight against criminals using the United States financial system for illicit purposes, many bankers begin to wonder what cost and additional employee time this system would require of them if they were required to ensure that their customers were inputting their information into this system. Each additional step at account opening takes time, and additional employee time is an expense to the bank.

To address this concern, on December 21, 2023, Federal regulatory agencies issued an Interagency Statement for Banks on the Issuance of the Beneficial Ownership Information Access Rule. This statement is critically important for two reasons as it states: bankers have the option to utilize this system or not, and they do not have to change their current practices. However, it also stated that banks will be given access to the system to use if the banker chooses to. The choice that this statement gives bankers takes away additional regulatory burden.