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Beneficial Ownership Information Reporting

Beneficial Ownership Information Reporting

The Corporate Transparency Act (CTA), enacted by Congress on Jan. 1, 2021, as part of the National Defense Authorization Act for Fiscal Year 2021, P.L. 116-283, introduces a filing requirement for many entities beginning in January 2024.

The purpose of the CTA is to increase transparency about who owns or controls an entity. Congress believes that illicit actors use U.S. entities to launder money for various illegal activities.

The CTA is designed to combat this and make it easier for law enforcement to track criminal activity by requiring certain types of entities to file a beneficial ownership information (BOI) report with Treasury’s Financial Crimes Enforcement Network (FinCEN).

To know whether these requirements apply to your company, you need to understand what a beneficial owner is and what the beneficial ownership information report contains.

What is FinCEN?

The Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury. Established in 1990, FinCEN's primary role is to safeguard the financial system from illicit use, combat money laundering, and promote national security through the collection, analysis, and dissemination of financial intelligence.

FinCEN works closely with law enforcement agencies, intelligence agencies, financial institutions, and regulatory entities. It implements and enforces compliance with certain parts of the Bank Secrecy Act, including the requirement for financial institutions to report suspicious activities that might signify money laundering, tax evasion, or other financial crimes.

FinCEN also plays a crucial role in fighting terrorism by tracking and cutting off sources of funding for terrorist activities. It achieves this by analyzing financial transactions and sharing this information with domestic and international partners.

BOI Key Takeaways:

Who Has to Report?

Companies required to report are called reporting companies. Reporting companies may have to obtain information from their beneficial owners and report that information to FinCEN.

Your company may need to report information about its beneficial owners if it is:

Who Does Not Have to Report?

There are 23 types of entities that are exempt from the BOI reporting requirements. Some of these entities include publicly traded companies, banks, not-for-profits, and certain large operating companies. These "large" companies are defined as organizations that:

BOI Required Information

For each beneficial owner, the reporting company will need to provide the beneficial owner's:

Full legal name Date of birth
Current address
Unique identifying number from an acceptable identification document (driver's licenses, passports or FinCEN identifiers are acceptable), and
An image of their government-issued photo ID from which the identifying number was provided

Preparing for the CTA

All potential reporting companies should start preparing for the CTA by:

Potential Penalties

Failing to meet your BOI reporting requirements may subject you to FinCEN penalties. Remember that the reports, and the CTA in general, exist to quash crimes, including money laundering, tax evasion, and terrorist financing.

The potential penalties include the following for reporting violations:

There are also penalties for use violations and the unauthorized disclosure of information in a BOI report, as follows:

Furthermore, if a violation accompanies the breaking of other laws and establishes a pattern of illegal activity involving $100,000 or more within 12 months, you could be in bigger trouble. In that case, you may receive an enhanced financial penalty of up to $500,000 and imprisonment of up to 10 years.

The new BOI Reporting guidelines should be taken seriously. The penalties for willfully incorrectly filing — or completely failing to file — a BOI report are severe.

BOI Reporting Plan Includes