LEGISLATIVE UPDATE: Beneficial Ownership Information Reporting Requirements
LEGISLATIVE UPDATE: Beneficial Ownership Information Reporting

Date

Beginning January 1, 2024, the U.S. government now requires (certain) companies to file: “Beneficial Ownership Information Reporting.” This means businesses (that fit the regulatory criteria) must report information about their beneficial owners to FinCEN.

As with most new governmental regulations, there are plenty of questions about the who, what, where, and why. Meanwhile, if you’re like many small business owners, you’re probably wondering if this new requirement applies to your business. And what, if anything, you need to do about it?

To offer some guidance on the new Beneficial Ownership Information Reporting requirements, here’s a brief FAQ (Frequently Asked Questions) that outlines the regulations:

What is FinCEN?

An abbreviation for Financial Crimes Enforcement Network, FinCEN is a United States Department of the Treasury bureau. FinCEN collects and analyzes information about financial transactions to combat domestic and international money laundering, terrorist financing, and other financial crimes.

What qualifies as Beneficial Ownership Information?

Beneficial ownership information refers to the identifying details of individuals who have direct or indirect ownership or control over a company.

Why must companies report Beneficial Ownership Information to the U.S. Department of the Treasury?

In a bipartisan session, Congress passed the Corporate Transparency Act in 2021, which established a new reporting mandate for beneficial ownership information. The law is intended to bolster the U.S. government’s efforts to make it more difficult for bad actors to hide or benefit from their ill-gotten gains through shell companies or other misleading ownership structures.

Who can access beneficial ownership information under the Corporate Transparency Act?

The Corporate Transparency Act, FinCEN authorizes Federal, State, local, and Tribal officials, as well as certain foreign officials, to request beneficial ownership information from the U.S. federal government.

Under what circumstances is access to Beneficial Reporting Information granted?

The primary purpose of allowing access to beneficial reporting information is to enable U.S. intelligence agencies and law enforcement to protect national security.

Certain financial institutions may also access beneficial ownership information if authorized by the reporting company. Regulators of these financial institutions will also have access to beneficial reporting information in their role supervising authorized institutions.

Which companies must report Beneficial Ownership Information to FinCEN?

Companies required to report (termed “reporting companies”) and fall into two categories:

  • Domestic reporting companies — Corporations, limited liability companies, and any other entities established by filing documents with a secretary of state or any similar office in the United States.
  • Foreign reporting companies –– Entities (including corporations and limited liability companies) formed under foreign law registered to conduct business in the United States by filing documents with a secretary of state or similar office.

What are the penalties for individuals who fail to comply with Beneficial Ownership Information reporting requirements?

As outlined in the Corporate Transparency Act, individuals who knowingly breach Beneficial Ownership Information reporting requirements could face civil penalties of up to $500 for each day their violation persists.

In addition, they may be subject to criminal penalties, including imprisonment of up to two years and a fine of up to $10,000.

What constitutes a “willful violation?”

Actions such as deliberately neglecting to submit a beneficial ownership information report, knowingly filing false beneficial ownership information, or intentionally failing to rectify or update previously submitted beneficial ownership information are considered “willful violations” of Beneficial Ownership Information reporting requirements.

Have More Questions About Beneficial Ownership Information Reporting Requirements?

If you own a company that’s incorporated, arranged as an LLC, or required filing paperwork with a state or federal agency, you’re likely subject to Beneficial Ownership Information regulations.

If you have concerns about compliance or need assistance with reporting — Please get in touch for a FREE Consultation!

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