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The US Corporate Transparency Act (CTA) was primarily introduced to help tackle illicit activities by increasing the transparency of company ownership structures. By requiring companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), the CTA aimed to prevent misuse of corporations and limited liability companies for criminal gain – helping prevent money laundering, fraud, financing of terrorism, and so on.
In September 2022, FinCEN finalized a rule introducing a reporting obligation for beneficial ownership information (BOI) under the CTA. Now, many business entities are disclosing their ownership and control data.
On March 21, 2025, FinCEN released an interim final rule on that significantly changes the CTA and the federal collection of BOI. This new rule removes any reporting requirements and enforcement actions for entities formed under U.S. state or tribal laws, as well as for U.S. persons who are considered beneficial owners.
1. What is beneficial ownership information?
BOI encompasses details about individuals who directly or indirectly own or control a company. Identifying these owners is crucial to understanding who you are doing business with so decisions can be made with confidence and within risk tolerance.
BOI helps you establish trust with legitimate businesses and business owners; contributes to understanding risk exposure in relation to, for example, higher risk jurisdictions, sanctioned individuals, or politically exposed persons; and it can help reveal when an entity sits outside risk tolerance, so the relationship can be ended. BOI can also direct the level of monitoring required to limit risk and report issues efficiently.
2. Why is beneficial ownership information important?
Understanding beneficial ownership can make it harder for wrongdoers to hide behind or benefit from opaque ownership structures. Shell companies, for example, can be used to disguise illicit activities and the money generated from them. It can be difficult and time-consuming to identify patterns of shell company risk without access to BOI.
BOI is important to financial institutions as part of their basic due diligence processes and collecting the information is typically a regulator requirement. It’s important to governments who may be issuing export licenses or approving loans and grants or government contracts. And it’s important to businesses in all areas of commerce as part of their third-party risk management strategies. Without BOI it’s impossible to measure risk exposure, and therefore mitigate against it, and comply with laws on sanctions, terrorist financing, fraud, and money laundering.
3. What does substantial control mean?
Someone can exercise substantial control over a company in different ways, and there are different regional variations for the definition of substantial control, as well as beneficial ownership. Adding individuals with significant control is a newer concept in the US introduced as a requirement in the CTA. According to FinCEN, if an individual fits any of the following criteria, they could be deemed to be exercising substantial control:
- Someone who is a senior officer – the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function.
- Someone with the authority to appoint or remove certain officers or a majority of directors of the reporting company.
- Someone who is an important decision-maker within or for the reporting company.
- Someone with any other form of substantial control over the reporting company, such as someone with influence over important decisions.
4.Who is filing beneficial ownership information?
Following FinCEN’s interim final rule issued in March 2025, only one type of reporting company falls within the BOI rules–Foreign reporting companies: Entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the U.S. by the filing of a document with a secretary of state or any similar office.
5.Under the Corporate Transparency Act, who can access beneficial ownership information
Under the CTA, authorized entities, including federal, state, local, and tribal officials, along with certain foreign officials, can access beneficial ownership information for national security, intelligence, and law enforcement purposes.
Financial institutions may also gain access under specific circumstances, with consent from reporting companies. However, access to this information isn’t a given; it’s not ubiquitous, even though other organizations and entities may benefit from accessing it for due diligence and risk management purposes.
6.When and how do entities file beneficial ownership information?
Foreign entities, who are reporting companies, must file within 30 days of the interim rule's publication if they were registered before that date. Reporting companies registered to do business in the U.S. on or after the rule's publication have 30 calendar days to file an initial BOI report after they receive notice that their registration is effective.
Companies required to report their beneficial ownership information to FinCEN need to do so electronically through a secure filing system available via the FinCEN website. Information on beneficial owners includes names, dates of birth, addresses and identifying numbers, such as a passport or driver’s license. The report can be filed by anyone with authority from the reporting company, such as an employee, owner, or third-party service provider.
FinCEN launched the BOI E-Filing System website for reporting BOI on January 1, 2024. Any changes to ownership or control will also require businesses to file with FinCEN.
7.What are the consequences of not filing or misfiling beneficial ownership information?
The penalties for violations or misreporting can be severe. Foreign companies violating the reporting requirements may be liable for penalties of up to $500 for each day of continuing violation and criminal penalties include up to two years imprisonment and up to a $10,000 fine.
In March 2025, the Treasury Department announced there would now be no penalties or fines for US citizens or domestic reporting companies or their beneficial owners.
Moody's solutions for UBO discovery
Orbis
Moody’s Orbis is the world’s most powerful comparable data resource on private companies, with information on more than +489 million entities worldwide. Orbis can be used to calculate power scores and integrated percentages for a full picture of beneficial ownership and control.
Grid
Grid provides an extensive, curated, risk-relevant database for use in anti-money laundering and counter-terrorist financing processes. Information about a person or organization is collated into a risk profile using continuous monitoring of thousands of data sources and coverage of adverse media, sanctions and watchlists, and politically exposed persons information.
Entity Verification API
Moody’s Entity Verification API offers a centralized solution for organizations to access real-time entity data from over 200 countries, including curated details on over 500 million global companies and a comprehensive risk database. Through a single source, our configurable solution can be used to support customer onboarding, client lifecycle management, perpetual KYC, third-party risk management, fraud prevention, and more.
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Summary
The Beneficial Ownership Information reporting framework established by the CTA is a crucial step toward transparency and accountability put in place by the US authorities. Organizations need to be diligent in understanding and meeting their obligations. However, the data submitted to FinCEN will not be openly available to the public, and therefore its use in due diligence, compliance, and risk management processes is limited.
Outside the BOI reported to FinCEN, there are existing and robust sources of beneficial ownership data and other risk-relevant information available to organizations globally to help them achieve corporate transparency, so decisions can be made with confidence when deciding who to work with.
Moody’s has a range of tools and datasets to facilitate entity verification, confirm ownership information, identify shell company risk, and screen for PEPs, sanctions, and adverse media stories.
How Moody’s can help
Moody’s has robust, global sources of beneficial ownership data and other risk-relevant information available to organizations to help them achieve corporate transparency. This data can be used as part of onboarding, risk assessment or monitoring, and enhanced due diligence, so decisions can be made with confidence when deciding who to work with.
Moody’s has a range of tools and datasets to facilitate entity verification; confirm beneficial ownership information; identify shell company risk; and screen for PEPs, sanctions, and adverse media news stories.
For more information about how Moody’s can help you access beneficial ownership information and integrate that into your compliance and risk management processes, pleaseget in touch– we would love to hear from you.
