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$500 Fine Per Day If You Don't Comply With The New Corporate Transparency Act


FINCEN BOI or $500 fine
FinCEN BOI


Congress enacted the CTA of 2021 (Corporate Transparency Act), which established a new regulation: the FinCEN (Financial Crimes Enforcement Network) BOI (Beneficial Ownership Information) reporting requirement. Understanding what FinCEN BOI entails and its implications for your business is essential to ensuring compliance and contributing to a more transparent financial landscape.


Pay attention to the act, or you may be fined $500 daily.



What is FinCEN BOI?


FinCEN BOI is a new regulation in the United States that requires certain businesses to report information about their beneficial owners to FinCEN, a bureau of the Treasury Department. The agency's primary function is to combat money laundering, funds embezzlement, terrorist financing, and other financial crimes. The BOI reporting requirement mandated by the CTA empowers FinCEN to collect and maintain a secure archive of beneficial ownership information for certain businesses.


 

Who are Beneficial Owners?


Beneficial owners own or control a company, even if they do not hold majority shares. This can include individuals who:

  • Own or control at least 25% and more company voting rights.

  • Have the right to appoint or remove most of the company's directors.

  • Have the right to exercise significant control over the management or assets of the company.


 

Why is FinCEN BOI Important?


FinCEN BOI aims to increase transparency by:

  • Deterring Illegal Activity: FinCEN BOI discourages money laundering, terrorist financing, and other financial crimes by making it harder for criminals to hide behind anonymous and offshore companies.

  • Enhancing Law Enforcement Investigations: Law enforcement agencies can leverage BOI data to identify individuals behind suspicious financial activities.

  • Promoting Financial Stability: Increased transparency fosters a more robust financial system by reducing the risk of economic crimes.



Who Needs to Report BOI Information?


Not all businesses are subject to FinCEN BOI reporting. Following is a breakdown of who needs to comply:

  • Reporting Companies

    • Corporations, limited liability companies (LLCs), or similar entities formed in the US.

    • Foreign companies registered to do business in the US.

  • Exempt Entities

    • Publicly traded companies

    • Certain large operating companies

    • Banks, credit unions, and other financial institutions

    • Tax-exempt organizations


FinCEN resources (https://fincen.gov/beneficial-ownership-information-reporting) are available to help individuals determine the reporting status of their companies.



What BOI Information Needs to be Reported?


The specific BOI information required includes:

  • Reporting company: Legal name, address, and FinCEN ID (if assigned).

  • Beneficial owners: Full name, date of birth, address, and a government-issued identification number (e.g., passport number, ID).

  • Relationship to the company: Nature of the beneficial ownership (e.g., percentage of ownership, control rights).

 


How to Report BOI Information?


FinCEN has established a user-friendly online filing system for BOI reporting called BOI E-Filing. It can be accessed through their website: https://fincen.gov/beneficial-ownership-information-reporting. You can also file by completing and uploading a PDF form.


Following are some essential reporting deadlines as required by FinCEN:

  • Companies formed or registered before January 1, 2024, have until January 1, 2025, to file their initial BOI reports.

  • Companies formed or registered on or after January 1, 2024, have 90 days after formation to file their initial BOI reports.

  • Any subsequent updates to BOI information must be reported within 30 days of the change.


 

Penalties for Non-Compliance


Failure to comply with FinCEN BOI reporting can result in significant penalties under civil and criminal categories.

  • Civil penalties are up to $500 per day for non-compliance.

  • Criminal fines of up to $10,000 and imprisonment for up to two years for willful violations.



What are the Resources for Compliance?


FinCEN provides the following valuable resources to assist businesses with BOI reporting:


These resources offer detailed guidance on understanding the required information, determining the reporting status, and navigating the BOI filing process.

 


Data Security and Access of BOI Information


FinCEN takes data security very seriously. The BOI repository is maintained with robust safeguards to protect sensitive information. Only authorized users, such as law enforcement agencies and certain government officials, can access BOI data for legitimate purposes related to national security, intelligence, and law enforcement activities.


 

Impact on International Business


The CTA and FinCEN BOI are primarily concerned with US-based companies. However, similar regulations implemented in other countries reflect a growing global commitment to beneficial ownership transparency. Businesses operating internationally should stay informed about evolving rules in their respective markets.

 

In a nutshell, FinCEN BOI is a significant step towards the fight against financial crimes. It safeguards a more transparent and secure financial system. Businesses can ensure compliance and contribute to a healthier economic environment by understanding regulations, reporting obligations, and leveraging available resources. Remember timely and accurate reporting avoids potential penalties and demonstrates a commitment to ethical business practices. We may expect persistent refinements and possible adjustments to the regulation as FinCEN BOI continues to be implemented. Businesses must stay updated by monitoring the FinCEN website and relevant industry publications.


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