Operating as a bureau of the U.S. Department of Treasury, the Financial Crimes Enforcement (FinCEN) plays a vital role in protecting businesses and the economy at large. FinCEN collects, analyzes, and distributes financial intelligence to law enforcement agencies to identify and prosecute illegal activities including (but not limited to) money laundering and terrorist financing.
Beneficial Ownership Information (BOI) refers to data about individuals who own, control, or benefit from a legal entity, such as a corporation or limited liability company. These individuals are known as beneficial owners: individuals who own or control at least 25% of the ownership interests in the entity and exercises substantial control over the entity.
Recently, FinCEN issued a notice regarding the new BOI reporting requirements for financial institution customers, which went into effect on January 1, 2024. These requirements, part of the Corporate Transparency Act (CTA), mandate certain entities to report detailed information about their beneficial owners to FinCEN. The aim is to increase corporate transparency and combat illicit financial activities.
Here’s what you need to know:
Who Must Report
- Domestic reporting companies including corporations, limited liability companies (LLCs), and other similar entities created by filing with a state or tribal authority.
- Foreign reporting companies including entities formed under foreign laws and registered to do business in the U.S.
- Exemptions include certain large operating companies, regulated entities, inactive entities, and others specified in the rule.
What Information is Required
- Reporting companies must provide information on their beneficial owners, which includes individuals who:
- Exercise substantial control over the company
- Own or control at least 25% of the ownership interests.
- Information required includes the beneficial owner(s)’ name, birthdate, address, and a unique identifying number from an acceptable identification document.
Definition of “Substantial Control”
“Substantial Control” is broadly defined to cover various forms of influence over the company’s important decisions, including senior officers, those with authority over the board of directors, and other key decision-makers. This ensures that entities cannot obscure control through complex structures.
When Companies Must Report
If you have a new company that was formed or registered after January 1, 2024, you must file your BOI reports within 30 days of formation or registration. Existing companies have until January 1, 2025, to comply.
How the Information is Accessed and Protected
BOI is accessible to authorized government authorities and financial institutions under strict conditions to ensure privacy and data protection. This rule aims to balance transparency and the need to protect your sensitive personal information.
FinCEN anticipates that the majority of reporting companies will have straightforward compliance processes due to simple ownership structures. It estimates the cost to be about $85 per initial report for such companies.
SOURCES:
Read the Notice from FinCEN: https://www.fincen.gov/sites/default/files/shared/BOI-Notice-to-Customers-508FINAL.pdf