June 14, 2024

New Federal Reporting Requirement for Beneficial Ownership Information (BOI)

US Companies

 

Effective January 1, 2024, many companies in the United States must begin to submit information about their beneficial owners – the individuals who ultimately own or control the company – to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

The US Corporate Transparency Act was primarily introduced to help tackle illicit activities by increasing transparency of company ownership structures. By requiring companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), the Act aims to prevent misuse of corporations and limited liability companies for criminal gain - preventing money laundering, fraud, financing of terrorism, and so on.

Reporting Companies

There are two types of reporting companies that fall within the BOI rules set out by FinCEN:

Domestic reporting companies – these are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar US office.

Foreign reporting companies – these are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the US by filing of a document with a secretary of state or any similar office.

There are some exemptions to these reporting companies, including publicly traded companies meeting specified requirements, some nonprofits, and certain large operating companies.

 

Under the Act, authorised entities, including federal, state, local, and tribal officials, along with certain foreign officials, can access beneficial ownership information for national security, intelligence, and law enforcement purposes.

Financial institutions may also gain access under specific circumstances, with consent from reporting companies. However, access to this information isn’t a given; it’s not ubiquitous, even though other organizations and entities may benefit from accessing it for due diligence and risk management purposes.

When and how do entities need to file beneficial ownership information

Companies that are required to report their beneficial ownership information to FinCEN, need to do so electronically through a secure filing system available via the FinCEN website. Information on beneficial owners includes names, dates of birth, addresses and identifying numbers such as a passport or driver’s license. The report can be filed by anyone with authority from the reporting company such as an employee, owner or third-party service provider.

FinCEN launched the BOI E-Filing website for reporting beneficial ownership information on January 1, 2024.

  • Any reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report.
  • Any 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.
  • Companies created or registered prior to January 1, 2024, have until January 1, 2025, to file.
  • Any 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.

Any changes to the ownership or control will also require businesses to file with FinCEN within the associated timeframe.

 Consequences of not filing

The penalties for violations or misreporting can be severe. Anyone wilfully violating the reporting requirements could be liable for penalties of up to $500 for each day of continuing violation and criminal penalties include up to two years imprisonment and up to a $10,000 fine.

Currently mistakes or omissions can be corrected within 90 days of the deadline for the original report. However, firms could face civil and criminal penalties for disregarding their BOI reporting with the deadline fast approaching.

Fiduciary Group would handle the reporting obligations for the companies under our management. Please contact your company manager or email us on info@fid.gi should you wish to discuss any matters related to this brief.