Effective January 1, 2024, FinCEN mandates that companies report their beneficial ownership information (BOI). This report provides detailed information on compliance requirements, deadlines, and the specific information that must be reported.
What is FinCEN? The Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury that combats financial crimes, including money laundering and terrorist financing.
What is Beneficial Ownership? Beneficial ownership refers to the individuals who ultimately own or control a company, either directly or indirectly.
What are the Compliance Requirements? The Reporting Rule mandates that companies report their beneficial ownership information (BOI) to FinCEN, aiming to increase transparency and prevent financial crimes.
When did the Compliance Requirements take Effect? Beginning January 1, 2024, BOI reports must be filed electronically using FinCEN’s filing system.
Which Companies must Comply with the Reporting Requirements? Entities required to report include corporations, LLCs, and other similar entities created or registered in the U.S., unless exempt. Companies should verify whether they are considered reporting companies by internally reviewing the criteria provided by FinCEN and documenting the same.
Who are Beneficial Owners? Beneficial owners are individuals who ultimately own or control a company, either directly or indirectly, or who own or control at least 25 percent of a reporting company’s ownership interests.
What Information must be Reported? The reports must contain information about the entity itself and two categories of individuals: beneficial owners and company applicants. Furthermore, companies must report the name, date of birth, address, and unique identifying number (e.g., driver’s license or passport number) of each beneficial owner.
How will BOI Reports be Secured or Protected? FinCEN will store the reports in a secure, non-public database using rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level. Once in the centralized database, the reports will only be shared with authorized users for purposes specified by the law.
How will FinCEN Safeguard BOI Reports? FinCEN will work closely with those authorized to access beneficial ownership information to ensure that they understand their roles and responsibilities in using the reported information only for authorized purposes and handling it in a way that protects its security and confidentiality.
Who will have Access to Information within the Reports? FinCEN will permit Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will have access to beneficial ownership information in certain circumstances, with the consent of the reporting company. Those financial institutions’ regulators will also have access to beneficial ownership information when they supervise the financial institutions.
When must you comply with the requirements? Companies created before January 1, 2024, must file by January 1, 2025. Companies created on or after January 1, 2024, but before January 1, 2025, have 90 days after creation to file. Companies created on or after January 1, 2025, have 30 days after creation to file.
Which Entities are Exempt from the Reporting Requirements? Twenty-three types of entities are exempt from BOI reporting, including banks, credit unions, accounting firms, public utilities, insurance companies, and investment advisors.
How can I Determine if my Company is Exempt from the Requirements? Companies should verify if they or entities within their corporate structure qualify for any exemptions by internally reviewing the criteria provided by FinCEN and documenting the same.
What penalties arise from violating BOI reporting requirements? Non-compliance, in which a person willfully violates the BOI reporting requirement, may be subject to civil penalties of up to $500 for each day the violation continues. Non-compliance may also result in criminal penalties of up to two years imprisonment and/or a fine of up to $10,000.
Who can be held liable for violating BOI reporting requirements? Both individuals and corporate entities can be held liable for willful violations. Senior officers of non-compliant entities may also be held accountable.
When and How must Entities Update or Correct their BOI Reports? Companies must update their BOI report within 90 days of any change in reported information. Updates must be filed electronically using FinCEN’s secure system and ensure that all reported information is accurate and complete to avoid penalties.
Why It Is Beneficial to Have an Attorney Prepare Your BOI Hiring an attorney to prepare your BOI report offers numerous benefits:
• Legal Expertise: Attorneys possess comprehensive knowledge of the BOI requirements and relevant laws, ensuring your filings are complete, accurate, and compliant with current regulations.
• Reduced Risk of Penalties: An experienced attorney can mitigate the risk of errors or omissions that could lead to significant fines and penalties.
• Tailored Guidance: Attorneys provide personalized advice to determine whether your company qualifies for any exemptions and help document compliance efforts properly.
• Confidentiality and Security: Legal professionals are bound by attorney-client privilege, offering an additional layer of confidentiality and protection when handling sensitive information.
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