Learn More: Step-by-Step Instructions for Filing FinCEN BOIR Reports

The Financial Crimes Enforcement Network (FINCEN) plays a pivotal role in preventing money laundering, terrorism financing, and other illicit financial activities in the United States. As part of its efforts, FINCEN has established requirements for the Beneficial Ownership Information Reporting (BOIR), which mandates that certain entities report information about their beneficial owners to help increase transparency in the financial system.

In this article, we will explore what the FINCEN BOIR filing requirements entail, which entities are affected, and how organizations can comply with the new regulations.

What is the FINCEN BOIR?

The Beneficial Ownership Information Reporting (BOIR) is a new regulatory framework established by the Corporate Transparency Act (CTA), which was enacted in 2021 as part of the National Defense Authorization Act (NDAA). The goal of the CTA and the BOIR is to combat money laundering, tax evasion, and other illicit activities by creating a more transparent financial system. The act requires certain entities to disclose the beneficial owners—the individuals who ultimately own or control the entity—so that law enforcement agencies can access this information when necessary.

The BOIR mandates that businesses provide information about their beneficial owners to FINCEN, which will maintain a database of beneficial ownership information. This database will be accessible to authorized users, including law enforcement and financial institutions, to better detect and prevent illicit activities.

Who Needs to File the FINCEN BOIR?

Under the Corporate Transparency Act, the FINCEN BOIR filing requirement applies to a broad range of entities, although some exceptions exist. The primary entities required to file are:

1. Domestic Corporations and Limited Liability Companies (LLCs):
   • Any corporation or LLC formed in the United States will generally be required to disclose beneficial ownership information, unless exempt.
2. Foreign Entities Doing Business in the U.S.:
   • Foreign companies that register or operate in the U.S. must also file, as long as they meet certain criteria (i.e., registering as a foreign entity with a state).
3. Exempt Entities:
   • Certain types of entities are exempt from the BOIR filing requirements. These include:
     • Large operating companies that employ more than 20 people, generate revenue exceeding $5 million, and file federal income tax returns.
     • Regulated entities, such as banks, credit unions, and registered investment companies, which are already subject to other regulatory reporting requirements.
     • Certain inactive entities with no significant assets or operations.

What Information Must Be Reported?

The FINCEN BOIR filing requires entities to provide detailed information about their beneficial owners. The term “beneficial owner” refers to any individual who:

• Directly or indirectly owns or controls at least 25% of the entity’s equity interests or voting rights.
• Exercises substantial control over the entity, including those who have significant influence in the operations and decisions of the business.

The specific information that must be reported for each beneficial owner includes:

1. Full Legal Name: The complete name of the beneficial owner.
2. Date of Birth: The date of birth to verify the identity of the beneficial owner.
3. Residential Address: A physical address of the beneficial owner, not a business address.
4. Identification Number: This could be a passport number, driver’s license number, or other government-issued identification number.
5. A Photograph or Document for Verification: The entity must submit a document to verify the identity of the beneficial owner, such as a passport or driver’s license, to ensure authenticity.

This information helps create a transparent picture of who is ultimately controlling a business, which is crucial for law enforcement to prevent illicit activities like money laundering or fraud.

When Are the FINCEN BOIR Filings Due?

Entities must file their FINCEN BOIR within specific timelines:

1. New Entities:
   • For new entities, the BOIR must be submitted at the time of formation or registration. This includes corporations, LLCs, or foreign entities registering in the U.S.
2. Existing Entities:
   • Existing entities must file their BOIR by January 1, 2025, or within 30 days of receiving a notice from FINCEN that they must comply.
3. Updating Information:
   • Once filed, entities are required to update their beneficial ownership information within 30 days if any changes occur, such as a change in ownership or control.

Failure to file or update the information in a timely manner could result in significant penalties, including fines and potential legal action.

How to File the FINCEN BOIR

The process for filing the FINCEN BOIR is designed to be streamlined and user-friendly, with submissions taking place via FINCEN’s secure online portal. Entities must create an account on the portal and submit their beneficial ownership information electronically.

The filing process generally involves the following steps:

1. Registration: Create an account with FINCEN’s BOSS (Beneficial Ownership Secure System).
2. Enter Entity Information: Submit details about the entity, including the legal name, type of entity, and formation date.
3. Provide Beneficial Owner Information: Enter the required information about each beneficial owner.
4. Review and Submit: Review all the information for accuracy and submit the form electronically to FINCEN.
5. Confirmation: After submission, entities will receive a confirmation receipt, which should be saved for future reference.

Penalties for Non-Compliance

Failure to comply with the FINCEN BOIR requirements can result in serious consequences. The penalties for not filing or submitting inaccurate or incomplete information include:

• Civil Penalties: Fines of up to $500 per day for failure to file on time, up to a maximum of $10,000.
• Criminal Penalties: In cases of willfully providing false information or failing to file intentionally, penalties can include fines up to $250,000 and up to 2 years in prison.

These penalties underscore the importance of ensuring compliance with the FINCEN boir filings requirements.

The FINCEN BOIR filing requirements are a crucial step in enhancing transparency in the U.S. financial system. By requiring businesses to disclose information about their beneficial owners, the regulations help prevent money laundering, fraud, and other illegal activities. While the filing process may seem complex, it is essential for all relevant entities to comply in order to avoid penalties and to contribute to a more secure and transparent business environment.

Businesses should stay informed about these regulations, file their reports on time, and ensure that the information provided is accurate and complete. With these efforts, the U.S. government aims to create a safer and more transparent financial system for all.