What entities are exempt from reporting?
Currently, 23 listed entities are exempt from filing reports under the Reporting Rule. Most exemptions do not directly apply to small businesses and are directed towards larger operating companies.
The exemptions include:
1. Securities reporting issuers – Any issuer of securities that is: an issuer of class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l); or (B) required to file supplementary and periodic information under 15(d) of the Securities Exchange Act of 1934 – Persons engaged in the business of selling or issuing stored value or payment instruments, such as prepaid debit cards, gift cards, and money orders, when the activity is limited to the sale or issuance of such instruments.
2. A U.S. governmental authority – Any entity that (A) is established under the law of the United States, an Indian tribe, a State, or a political subdivision of a State, or under an interstate compact between two or more States; and (B) exercises governmental authority on behalf of the United States or any such Indian tribe, State, or political subdivision 31 – Persons engaged in the business of providing third-party bill payment services, when the activity is limited to the provision of such services.
3. Banks – any bank, as defined in (A) section 3 of the Federal Deposit Insurance Act of 1940 (B) Section 2(a) of the Investment Company Act of 1940 or (C) section 202(a) of the Investment Advisors Act of 1940 – Persons engaged in the business of sending or receiving funds transfers, when the activity is limited to the transmission of funds between a sender and a designated recipient.
4. Credit unions – any federal or state credit union as defined in section 101 of the Federal Credit Union Act – Persons engaged in the business of providing currency exchange services, when the activity is limited to the exchange of currency for other currency and does not include the transmission of funds.
5. Depository institution holding companies – Any bank holding company as defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), or any savings and loan holding company as defined in section 10(a) of the Home Owners’ Loan Act – Persons engaged in the business of providing check-cashing services, when the activity is limited to the cashing of checks.
6. Money services businesses – Businesses transmitting any money under 31 U.S.C. 5330 registered + any money services business under 31 CFR 1022.380 who is also registered with FinCEN – Persons engaged in the business of providing money-wiring services, when the activity is limited to the transmission of funds between a sender and a designated recipient.
7. Brokers or dealers in securities – Any broker or dealer, as those terms are defined in section 3 of the Securities Exchange Act of 1934 and who is registered under section 15 of the Act – Persons engaged in the business of providing traveler’s checks or money orders, when the activity is limited to the sale or issuance of such instruments.
8. Securities exchanges or clearing agencies – Any exchange or clearing agency, as those terms are defined in section 3 of the Securities Exchange Act of 1934, that is registered under sections 6 or 17A of that Act – Persons engaged in the business of providing automated clearinghouse (ACH) services, when the activity is limited to the provision of such services.
9. Other Exchange Act registered entities – Any entity other than that mentioned as: Securities reporting issuer, broker or dealer in securities, or securities exchange or clearing – Persons engaged in the business of providing money transmitting services, when the activity is limited to the transmission of funds between a sender and a designated recipient and does not include the sale or issuance of stored value or payment instruments.
10. Investment companies or investment advisors – Any entity that is: (A) An investment company as defined in section 3 of the Investment Company Act of 1940, or is an investment adviser as defined in section 202 of the Investment Advisers Act of 1940; and (B) Registered with the Securities and Exchange Commission under the Investment Company Act of 1940 or the Investment Advisers Act of 1940 – Persons engaged in the business of providing money transmitting services, when the activity is limited to the transmission of funds between a sender and a designated recipient and the funds are transmitted solely through an existing depository institution account or through a payment card network.
11. Venture capital fund advisors – Any investment adviser that: (A) Is described in section 203(l) of the Investment Advisers Act of 1940 and (B) Has filed Item 10, Schedule A, and Schedule B of Part 1A of Form ADV, or any successor thereto, with the Securities and Exchange Commission – Persons engaged in the business of providing money transmitting services, when the activity is limited to the transmission of funds between a sender and a designated recipient and the funds are transmitted through a payment card network.
12. Insurance companies – Any insurance company as defined in section 2 of the Investment Company Act of 1940 – Persons engaged in the business of providing money transmitting services, when the activity is limited to the transmission of funds between a sender and a designated recipient, and the activity is conducted solely through an automated teller machine (ATM) network.
13. State licensed insurance producers – Any entity that: (A) Is an insurance producer that is authorized by a State and subject to supervision by the insurance commissioner or a similar official or agency of a State; and (B) Has an operating presence at a physical office within the United States – Persons engaged in the business of providing electronic funds transfer (EFT) services, when the activity is limited to the provision of such services.
14. Commodity Exchange Act registered entities – Any entity that: (A) Is a registered entity as defined in section 1a of the Commodity Exchange Act or (B) is: (1) A futures commission merchant, introducing broker, swap dealer, major swap participant, commodity pool operator, or commodity trading advisor, each as defined in section 1a of the Commodity Exchange Act, or a retail foreign exchange dealer as described in section 2(c)(2)(B) of the Commodity Exchange Act; and (2) Registered with the Commodity Futures Trading Commission under the Commodity Exchange Act – Persons engaged in the business of providing payment processing services, when the activity is limited to the processing of payments that are initiated through a payment card network and does not include the transmission of funds.
15. Accounting firms – Any public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002 – Persons engaged in the business of providing mobile payment services, when the activity is limited to the provision of such services.
16. Public entities – Any entity that is a regulated public utility as defined in 26 U.S.C. 7701(a)(33)(A) that provides telecommunications services, electrical power, natural gas, or water and sewer services within the United States – Persons engaged in the business of providing money transmitting services through a payment card network, when the activity is limited to the transmission of funds between a sender and a designated recipient and the activity is conducted solely through a payment card network.
17. Financial market utilities – Any financial market utility designated by the Financial Stability Oversight Council under section 804 of the Payment, Clearing, and Settlement Supervision Act of 2010 – Persons engaged in the business of operating a payment system, when the activity is limited to the operation of such a system.
18. Pooled investment vehicles – Any pooled investment vehicle that is operated or advised by a person described in the exemption categories: banks, credit unions, broker or dealer in securities, investment companies or investment advisors or venture capital fund advisors – Persons engaged in the business of providing merchant services, when the activity is limited to the processing of payments that are initiated through a payment card network and does not include the transmission of funds.
19. Tax-exempt entities – Any entity that is: (A) An organization that is described in section 501(c) of the Internal Revenue Code of 1986 (Code) (determined without regard to section 508(a) of the Code) and exempt from tax under section 501(a) of the Code, except that in the case of any such organization that ceases to be described in section 501(c) and exempt from tax under section 501(a), such organization shall be considered to continue to be described in this paragraph for the 180-day period beginning on the date of the loss of such tax-exempt status; (B) A political organization, as defined in section 527(e)(1) of the Code, that is exempt from tax under section 527(a) of the Code; or (C) A trust described in paragraph (1) or (2) of section 4947(a) of the Code – Persons engaged in the business of providing online banking services, when the activity is limited to the provision of such services.
20. Entities assisting a tax-exempt entity – Any entity that: (A) Operates exclusively to provide financial assistance to, or hold governance rights over, any entity described in paragraph (c)(2)(xix) of this section; (B) Is a United States person; (C) Is beneficially owned or controlled exclusively by one or more United States persons that are United States citizens or lawfully admitted for permanent residence; and (D) Derives at least a majority of its funding or revenue from one or more United States persons that are United States citizens or lawfully admitted for permanent residence – Persons engaged in the business of providing online payments services, when the activity is limited to the provision of such services.
21. Large operating companies – Any entity that meets certain employment and/or tax reporting criteria: (A) have 20 or more full time employees in the U.S., and (B) filed an income tax return in the previous year with at least $5 million in gross receipts or sales, and (C) have an operating presence or physical office within the U.S. – Persons engaged in the business of providing online money transmitting services, when the activity is limited to the transmission of funds between a sender and a designated recipient and the activity is conducted solely through an online system.
22. Subsidiaries of certain exempt entities – Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities described in exemptions 1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 19, or 21 – Persons engaged in the business of providing merchant acquiring services, when the activity is limited to the processing of payments that are initiated through a payment card network and does not include the transmission of funds.
23. Inactive entities – Any entity that: (A) Was in existence on or before January 1, 2020; (B) Is not engaged in active business; (C) Is not owned by a foreign person, whether directly or indirectly, wholly or partially; (D) Has not experienced any change in ownership in the preceding twelve month period; (E) Has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding twelve month period; and (F) Does not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity – Persons engaged in the business of providing virtual currency services, when the activity is limited to the issuance and/or redemption of virtual currency.
Additional Specifics
Exemptions listed are mostly aimed at specialized types of entities currently regulated by federal or state departments. Private investment funds and other entities that are formed to create investments for groups are anticipated to be impacted by the Reporting Rule. Even though registered investment advisors are included in the exemption list, private fund advisors, foreign private fund advisors and family offices are not exempt.
If you are curious as to whether a beneficial ownership report should be filed, there are certain items to define. To begin, you must determine your entity type. Is it a corporation, LLC, or other entity that was created by filing a document with the Secretary of State or an office that is similar or formed under the law of a foreign country and registered to do business by filing a document with the Secretary of State or similar office. After you have categorized your entity, check to see if one of the 23 exemptions applies to your entity.
If you have any questions about what the exemptions entail, please reach out to our team of experts at CTA@RASi.com.
Please consult your attorney for any questions regarding if your entity is exempt from filing.
Sources:
FinCEN Frequently Asked Questions Published: March 24, 2023