JANUARY / FEBRUARY 2024
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Ensuring Compliance with FinCEN ’ s Reporting Rule Effective January 1 , 2024
The Financial Crimes Enforcement Network ( FinCEN ) published the Beneficial Ownership Information Reporting rule ( Reporting Rule ) to implement the Corporate Transparency Act 1 ( CTA ) on September 30 , 2022 , introducing significant changes impacting reporting requirements for companies . The rule aims to enhance transparency and curb illicit financial activities by expanding the scope of reporting obligations for beneficial ownership through beneficial ownership information ( BOI ) reports . The rule becomes effective on January 1 , 2024 with different filing deadlines for new and existing companies . Below are some key points of the CTA .
1 . Beneficial Ownership Reporting : The rule mandates certain companies , including corporations , LLCs , and other similar entities , to disclose information about their beneficial owners . Individuals with substantial control of a company are considered beneficial owners under the CTA . The following individuals are deemed to have sufficient control pursuant to the CTA , and thus are beneficial owners subject to reporting requirements :
a . A person holding a 25 % or greater interest in the company ; b . A person who holds a senior officer position , such as president , CEO , COO , CFO , LLC manager , or general counsel of the company , or otherwise performs a similar function , regardless of title ; c . Any person who directs , determines , or has substantial influence over important decisions made by the company regarding business , finances , or structure ; and d . Any person holding any other form of substantial control .
2 . Required Information : Companies falling within the rule ’ s scope must provide details such as the beneficial owner ’ s name , date of birth , address , and a unique identification number ( e . g ., a driver ’ s license or passport number ). The companies required to file BOI reports must “ identify two categories of individuals : the beneficial owners of the entity , and individuals who have filed an application with specified governmental authorities to create the entity or register it to do business .” 2
3 . Compliance Deadlines : Reporting companies created or registered in 2024 will have 90 calendar days from the date of receiving actual or public notice of their creation or registration becoming effective to file their initial reports . 3 On the other hand , reporting companies created or registered before January 1 , 2024 , will have until January 1 , 2025 , to file their initial BOI reports with FinCEN . Reporting companies created or registered on or after January 1 , 2025 , will have the period to file reduced to 30 calendar days to file their initial BOI reports with FinCEN . 4
By Katharine Haddad
4 . Enhanced Transparency : The Reporting Rule aims to enhance transparency in corporate structures , making it harder for criminals to hide behind anonymous companies to facilitate “ money laundering , terrorist financing , corruption , tax fraud , and other illicit activity , while minimizing the burden on entities doing business in the United States .” 5
5 . Implications for Reporting Companies : Companies covered by the rule need to identify and report their beneficial owners accurately to ensure compliance . Failure to do so may result in penalties or legal repercussions .
6 . Privacy Concerns : While the rule enhances financial transparency , it raises concerns about the privacy of individuals identified as beneficial owners and the security of their personal information .
7 . Penalties : Individuals who fail to adhere to the reporting requirements outlined in the CTA may encounter a civil fine of a maximum of $ 500 per day for each day they are not in compliance . Additionally , they could face criminal repercussions , including fines of up to $ 10,000 and imprisonment for a maximum of two years . 6
Overall , the Reporting Rule represents a significant step forward in combating financial crimes by increasing transparency within corporate structure , but it also poses challenges for affected companies in terms of compliance and data management .
Katharine Haddad is an associate attorney at Englander Fischer practicing business litigation . Prior to joining Englander Fischer , Katharine was an assistant state attorney in the Thirteenth Judicial Circuit . Katharine serves as the 2023-24 St . Petersburg Bar Association Young Lawyers Section President .
1 . Beneficial Ownership Information Reporting , 87 Fed . Reg . 59498 ( Sept .
30 , 2022 ) ( to be codified at 31 C . F . R . pt . 1010 ). 2 . Id . 3 . Financial Crimes Enforcement Network . ( Nov . 29 , 2023 ). FinCEN Extends Deadline for Companies Created or Registered in 2024 to File Beneficial Ownership Information Reports . https :// www . fincen . gov / news / newsreleases / fincen-extends-deadline-companies-created-or-registered- 2024-file-beneficial . 4 . Id . 5 . Beneficial Ownership Information Reporting , 87 Fed . Reg . 59498 ( Sept .
30 , 2022 ) ( to be codified at 31 C . F . R . pt . 1010 ). 6 . Beneficial Ownership Information Reporting , 87 Fed . Reg . 59498 , 59546
( Sept . 30 , 2022 ) ( to be codified at 31 C . F . R . pt . 1010 ).