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What are the FinCen Beneficial Ownership Information Reporting Requirements and Penalties

There are new federal business regulations on the horizon that will apply to a large number of businesses. FinCEN (the Financial Crimes Enforcement Network) has established reporting requirements for beneficial ownership information (BOI) as part of the Corporate Transparency Act. Starting January 1, 2024, many companies in the United States will be required to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company, to FinCEN. Existing companies will have one year to submit their initial reports, with a deadline of January 1, 2025, while new companies that are created or registered after January 1, 2024, will have to submit their reports within 30 days.

What is the Purpose of BOI Reporting

The purpose of the Beneficial Ownership Information (BOI) reporting requirement is part of the U.S. government’s efforts to make it more difficult for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. The crimes and activities that the Beneficial Ownership Information (BOI) reporting aims to prevent include money laundering, funding of terrorism, serious tax fraud, human trafficking, drug trafficking, counterfeiting, piracy, securities and financial fraud, acts of foreign corruption and other illicit financial activities. The Corporate Transparency Act, which mandates BOI reporting, aims to enhance transparency and prevent criminals from unlawfully benefiting financially by requiring companies to report certain information about the individuals who own or otherwise control the company. The disclosed information will be shared with appropriate authorities and financial institutions to combat concealed criminal actions.

What are the Penalties for Non-Reporting

The penalties for non-reporting or providing false information can be substantial. Businesses that fail to report their beneficial ownership information may face civil penalties of up to $500 per day for each day the violation continues, with a maximum of $10,000 and/or up to two years of imprisonment. Knowingly providing inaccurate information or failing to report complete or updated beneficial ownership information can also lead to civil or criminal penalties of up to $10,000 and up to two years in prison.

The FinCEN BOI penalties for non-reporting are significant, and it is essential for companies to understand and comply with the beneficial ownership reporting requirements to avoid facing these penalties.

FinCEN is working to ensure that reporting companies are aware of their obligations and has created the Small Entity Compliance Guide, which includes information about how to file initial reports and how to update and correct reported information. Companies that correct any mistakes or omissions within 90 days of the original report deadline may avoid penalties.

What Companies Need to Submit Reports

  • Domestic Reporting Companies: These are companies from the United States and include corporations, limited liability companies, and any other entities established by the filing of a document with a secretary of state or any similar office in the United States.
  • Foreign Reporting Companies: These are companies formed under the law of a foreign country outside of the United States that have registered to do business in the United States by filing a document with a secretary of state or any similar office.

What Are the BOI Reporting Exemptions

There are certain exemptions to the beneficial ownership information reporting requirements, which are fully detailed within the Small Entity Compliance Guide. The Corporate Transparency Act and its regulations provide 23 exemptions from the BOI reporting requirements. Some of the key exemptions include:

  • Securities reporting issuer
  • Governmental authority
  • Banks
  • Public accounting firms
  • Insurance companies
  • Registered charities
  • Certain types of pooled investment vehicles
  • Certain types of public companies
  • Certain types of entities with a physical U.S. presence and more than 20 full-time employees

These exemptions are intended to exclude certain types of entities from the reporting requirements based on their nature, size, or regulatory status. It’s important for companies to carefully review the qualifying criteria for each exemption to determine if they are exempt from the reporting requirements.

How to Learn More About BOI Reporting Requirements

People can learn more about the beneficial ownership information (BOI) reporting requirements on the official FinCEN website. FinCEN provides detailed information, including the reporting rule fact sheet, frequently asked questions (FAQs), and the Small Entity Compliance Guide. These resources offer insights into the reporting obligations, exemptions, deadlines, and the potential impact of the Corporate Transparency Act. By referring to these official sources, individuals and entities subject to the reporting requirements can gain a comprehensive understanding of their obligations and ensure compliance with the regulations.

Sources:

https://www.sixfifty.com/blog/fincen-boi-penalties/
https://www.fincen.gov/news/news-releases/fincen-finalizes-rule-use-fincen-identifiers-
beneficial-ownership-information
https://www.fincen.gov/sites/default/files/shared/BOI_FinCEN_Brochure_508C.pdf
https://www.fincen.gov/sites/default/files/shared/BOI_FAQs_Q&A_FINAL.508C_Sept.18.pdf
https://www.fincen.gov/boi
https://www.fincen.gov/boi-faqs
https://www.cooley.com/news/insight/2023/2023-12-08-fincen-beneficial-ownership-rule-
effective-january-1-2024-but-with-reporting-deadline-extension
https://www.fincen.gov/beneficial-ownership-information-reporting-rule-fact-sheet

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