FinCEN Adds New Security Measures for LLCs and other Entities.

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FinCEN requires Beneficial Ownership Information

FinCEN Requires Beneficial Ownership Information Reporting Rule

The U.S Treasury’s Financial Crimes Enforcement Network (FinCEN) made its final rule on implementing the beneficial ownership information (BOI) reporting. This is part of a concerted effort to crack down on the use of corporate structures for illicit purposes. The rule applies to most corporations, limited liability corporations and other entities created or registered in the United States. They must report information about their beneficial owners-the persons who ultimately own or control the company. These regulations go into effect on January 1, 2024.

BOI reporting is designed to protect national security and strengthen the integrity and transparency of the U.S. Financial system. The FinCEN rule will help stop criminal actors like oligarchs, kleptocrats, drug traffickers, human traffickers and others who use anonymous shell companies to hide their illicit proceeds. This rule will also address deficiencies in the U.S. anti-money laundering regime and other loopholes.

There are 23 types of entities that are exempt from the reporting requirements, but many exempt entities are already required to make reports to the government. Review FinCENs guidelines for more information.

Key Questions on the FinCEN Beneficial Ownership Information Reporting

  • Does my company have to report its beneficial owners?

If you are a small corporation or LLC, you will likely be required to report your BOI to FinCEN. A key factor in determining whether your company will have to report is whether you had to file a document with your state’s secretary of state or similar office to create your company or for foreign companies, register it to do business in the United States.

  • Who is the beneficial owner of my company?

A beneficial owner is any individual who exercises substantial control over your company or who owns or controls at least 25 percent of your company.

  • What specific information does my company need to report to FinCEN?

A reporting company will need to provide (1) its legal name and any trade name or DBA; (2) its address; (3) the jurisdiction in which it was formed or first registered, depending on whether it’s a U.S. or foreign company; and (4) its Taxpayer Identification Number (TIN). For each of your company’s beneficial owners and each company applicant (if required) your company will need to provide the individual’s: legal name, birthdate, address and an identifying number from a driver’s license, passport or other approved document for each individual as well as an image of that document.

  • When and how should my company file its initial report to FinCEN?

If your company is created or registered before January 1, 2024, file by January 1, 2025. Otherwise, file within 30 calendar days of receiving actual or public notice from your state’s secretary of state or similar office that your company was created or registered. FinCEN will accept reports electronically beginning January 1, 2024.

While the goal of this rule is commendable, it raises important questions concerning privacy and places a burden on millions of legitimate, law-abiding businesses. The BOI rule may seem to raise more questions than answers, however compliance is mandatory. To that end, we must be mindful of the looming deadline in January 2024.