The Financial Crimes Enforcement Network (FinCEN) introduced a final rule in September 2022 to implement the reporting provisions of the Corporate Transparency Act (CTA) passed by Congress in 2021, focusing on beneficial ownership information (BOI). This rule mandates business entities, both domestic and foreign, formed or registered in any U.S. state, to file a BOI report. The aim is to unveil the identities of anonymous shell companies involved in illicit activities like money laundering. The reporting requirement begins January 1, 2024. Twenty-three types of entities are exempt from BOI reporting requirements:

1) Securities reporting issuer,

2) Governmental authority,

3) Bank,

4) Credit union,

5) Depository institution holding company,

6) Money services business,

7) Broker or dealer in securities,

8) Securities exchange or clearing agency,

9) Other Exchange Act registered entity,

10) Investment company or investment adviser,

11) Venture capital fund adviser,

12) Insurance company,

13) State-licensed insurance producer,

14) Commodity Exchange Act registered entity,

15) Accounting firm,

16) Public utility,

17) Financial market utility,

18) Pooled investment vehicle,

19) Tax-exempt entity,

20) Entity assisting a tax-exempt entity,

21) Large operating company,

22) Subsidiary of certain exempt entities, and

23) Inactive entity.

The new regulation targets smaller businesses or entities that have received less scrutiny in years past.

The BOI report requires information such as legal names, addresses, jurisdictional details, and taxpayer identification numbers of reporting companies. For each beneficial owner and company applicant, details like full name, date of birth, residential address, and identification information are necessary. Beneficial owners are individuals exercising substantial control or owning at least 25 percent of a reporting company. Company applicants include those directly filing entity creation documents and those overseeing such filings for foreign reporting companies.

Individuals and reporting companies can obtain FinCEN Identifiers in lieu of providing required information. Non-compliance with providing accurate BOI may result in civil penalties or criminal charges. To be more specific, the BOI Small Entity Compliance Guide, states that "The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure." The rule becomes effective on January 1, 2024, with reporting deadlines specified for companies formed or registered before and after this date. 

FinCEN said it best, "If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025, to report BOI. If your company is created or registered on or after January 1, 2024, you must report BOI within 30 days of notice of creation or registration. Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days."

Familiarizing oneself with these new requirements is crucial to preventing hefty penalties and interest. For more details, please contact our office. Contact us for a copy of the Small Entity Compliance Guide released by FinCEN. We can also help you with the compliance of filing the BOI report for a fee, beginning in January 2024.