In 2016, the Financial Crimes Enforcement Network (FinCEN) began requiring financial institutions (FIs) to collect Beneficial Ownership Information (BOI) for most business customers. The purpose of BOI reporting is to help FinCEN stop the formation of anonymous shell companies, and to prevent illicit crime. To help explain what this means and why it's important, please read on.
The requirement states that FIs must collect information about owners of businesses with equity interests of 25% or more (Ownership Prong), and a single individual or executive that is responsible for the overseeing its financial operations (Control Prong). The Control Prong may or may not be an owner of 25% or more. Banks and credit unions typically collect BOI at the time a new account or relationship is established using internal customer due diligence procedures.
What's Changing?
On January 1, 2024. in addition to FI collection, FinCEN will start requiring businesses to self-report BOI. FinCEN is currently developing compliance and guidance documents designed to help companies comply with the new reporting rules. The agency also will be publishing a “Small Entity Compliance Guide” that will inform smaller companies and other entities required to file reports. It plans to reach out to industry associations as well as secretaries of state and similar offices so that they can provide BOI reporting implementation guidance to the companies within their organization or state.
To help understand more about Beneficial Ownership Reporting, the Financial Crimes Enforcement Network (FinCEN) has created the following FAQs.
Does my company have to report its beneficial owners?
While certain types of entities are exempt, if you are a small corporation or LLC, you will likely be required to report your beneficial ownership information 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 a 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% of your company.
Does my company have to report its company applicants?
There can be up to two individuals who qualify as company applicants:
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The individual who directly files the document that creates, or first registers, the reporting company; and
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The individual that is primarily responsible for directing or controlling the filing of the relevant documents.
Your company is only required to report its company applicants if its created or registered on or after January 1, 2024.
What specific information does my company need to report?
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 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: (1) legal name; (2) birthdate; (3) address (in most cases, a home address); and (4) an identifying number from a driver's license, passport, or other approved document for each individual, as well as an image of the document that the number is from.
When and how should my company file its initial report?
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.
What if there are changes to or inaccuracies in reported information?
Your company will have 30 days to report any changes to reported information. For updates, the 30 days start after you become aware of, or have reason to know of, an inaccuracy in a prior report.
The information provided is only explanatory and does not supplement or modify any obligations imposed by statute or regulation. Please refer to the beneficial ownership information reporting final rule, available at www.fincen.gov/boi for details on specific provisions.
