At the beginning of 2023, many corporations, LLCs and other entities created or registered to do business in the U.S. were required to begin reporting information about their beneficial owners (BOI) —the persons who ultimately own or control the company—to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
The requirements were significantly tightened to improve transparency, prevent financial crime, and foster trust in the financial system. The BOI rules were driven by global standards, notably from the Financial Action Task Force (FATF), and domestic regulations in various jurisdictions.
The deadlines for meeting the Business Ownership Information (BOI) Reporting Requirements are coming soon.
- A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report.
- A reporting company created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.
- A reporting company created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.
In general, a beneficial owner is any individual (1) who directly or indirectly exercises “substantial control” over the reporting company, or (2) who directly or indirectly owns or controls 25 percent or more of the “ownership interests” of the reporting company. The law applies to domestic companies, trusts and other legal arrangments, as well as foreign companies doing business in the U.S.
Subject to strict safeguards and controls, FinCEN now shares the reported business ownership information with law enforcement agencies, financial institutions and other authorized users. To ensure compliance, FinCEN launched the BOI E-Filing website for reporting beneficial ownership information (https://boiefiling.fincen.gov) on January 1, 2024. This system provides a more simplified and streamlined process for financial entities to submit, store, secure, and maintain their data.
Here are some of the key elements of the FinCEN reporting system:
1. Identification and Verification: Entities are now required to identify and verify the beneficial owners of companies, trusts, and other legal arrangements. This involves collecting and maintaining accurate and up-to-date information about the individuals who ultimately own or control these entities.
2. Registration: In many jurisdictions, companies are required to register beneficial ownership information in a central registry. Some countries have made these registries publicly accessible to enhance transparency.
3. Enhanced Due Diligence: Financial institutions are now mandated to perform Enhanced Due Diligence (EDD) on customers who present a higher risk, including beneficial owners. This can include gathering additional information, monitoring transactions, and updating customer profiles more frequently.
4. Risk Assessment: Entities are required to conduct risk assessments to understand their exposure to potential BOI-related risks. This includes assessing the risk of dealing with anonymous owners, politically exposed persons, or individuals from high-risk countries.
5. Reporting Obligations: The new procedures expand upon the types of transactions that must be reported. Entities may be required to report suspicious activity related to beneficial ownership. This includes notifying relevant authorities if there are doubts about the veracity of beneficial ownership information, or if there are suspicions of money laundering or illicit financing.
6. Record Keeping: Entities must maintain records of beneficial ownership information, and the steps taken to identify and verify this information, for a prescribed period.
Non-compliance can result in substantial penalties, including financial fines, reputational damage, and even imprisonment. These new government requirements can be complex and involve various factors, such as the size of the company or entity and the structure, nature and jurisdiction in which it operates. It's essential to have accurate and reliable information when assessing your compliance obligations.
