In recent years, financial transparency and anti-money laundering (AML) regulations have become central to global efforts to prevent illicit activities such as money laundering and terrorism financing. One of the key developments in the United States has been the introduction of the Beneficial Ownership Information Reporting (BOIR) requirements, as mandated by the Financial Crimes Enforcement Network (FINCEN), a division of the U.S. Department of the Treasury. The boir filings is a part of broader efforts to enhance corporate transparency and increase accountability for legal entities in the U.S.
The FINCEN BOIR filing requirements are designed to collect information about the true owners of companies, known as beneficial owners, which has important implications for businesses, their investors, and financial institutions. Here’s a detailed look at the FINCEN BOIR filing requirements and how organizations can comply with them.
What is FINCEN and the BOIR Filing?
The Financial Crimes Enforcement Network (FINCEN) is a bureau of the U.S. Department of the Treasury that is tasked with safeguarding the financial system from illegal activities, such as money laundering, terrorist financing, and other financial crimes. FINCEN achieves this by enforcing regulations and facilitating the collection and sharing of financial information across the U.S. and international borders.
As part of the Anti-Money Laundering Act (AMLA) of 2020, the Corporate Transparency Act (CTA) was enacted. This legislation mandates that certain types of companies file Beneficial Ownership Information Reports (BOIR) with FINCEN. These filings are designed to identify the true owners of companies, as opposed to just the official registrants, to prevent the use of shell companies for illicit purposes.
A beneficial owner is someone who ultimately owns or controls a company, either directly or indirectly. The BOIR filing ensures that this information is accessible to law enforcement, financial institutions, and other relevant entities that are working to combat financial crimes.
Who is Required to File the BOIR?
Not all entities are required to file the BOIR with FINCEN. The following entities must comply with the filing requirements:
- Domestic and Foreign Corporations
Any corporation, limited liability company (LLC), or similar entity that is registered to do business in the U.S. and has fewer than 20 employees and less than $5 million in annual revenue must file a BOIR. - Exemptions to Filing
Some entities are exempt from filing. Exemptions include large, well-established companies such as:- Regulated entities, like banks, credit unions, and investment firms, which are already subject to strict regulatory oversight.
- Inactive entities or companies that do not engage in active business operations.
- Larger entities that have more than 20 employees and over $5 million in revenue, or those that are already publicly traded.
- Foreign Entities
Foreign companies with operations in the U.S. may also be required to file a BOIR if they meet the criteria outlined by the CTA.
What Information Must be Included in the BOIR Filing?
The BOIR requires detailed information about the beneficial owners of a company. A beneficial owner is defined as someone who directly or indirectly owns 25% or more of the company or has substantial control over it. The required information typically includes:
- Full Legal Name
The exact legal name of each beneficial owner. - Date of Birth
The birthdate of the beneficial owner to help identify the individual. - Residential Address
A current residential address of the beneficial owner (this is not the company’s business address, but the personal address of the owner). - Unique Identification Number
The BOIR filing requires a unique identification number, which could be a driver’s license number, passport number, or other official government-issued identification number. - Nature of Ownership or Control
A description of how the beneficial owner exercises ownership or control over the company. This helps define the level of control the owner holds over decisions made by the company. - Company Identification Information
Basic information about the company itself, including its legal name, business address, state of incorporation, and IRS employer identification number (EIN).
When Do Businesses Need to File the BOIR?
The filing deadline for the BOIR is specified by FINCEN. The deadline varies depending on whether the entity is newly formed or an existing one:
- For Existing Entities
Existing entities are required to file their first BOIR no later than one year after the regulation’s effective date, which is expected to be January 1, 2024. Existing entities must file within this one-year period to comply with the CTA. - For Newly Formed Entities
Newly formed entities must file the BOIR within 30 days of formation or registration with the relevant state authority.
How to File the BOIR?
Businesses are required to file the BOIR electronically with FINCEN’s database. The filing process is intended to be simple and streamlined, as FINCEN has implemented a secure online system to collect this information.
The process typically involves:
- Registering for an account on the FINCEN website.
- Providing the required information for both the company and the beneficial owners.
- Submitting the filing electronically, after reviewing the provided information for accuracy.
Penalties for Non-Compliance
Failure to comply with the BOIR filing requirements can result in significant penalties for businesses. The penalties for non-compliance include:
- Civil Penalties: Fines of up to $500 per day for failure to file or inaccurate filings.
- Criminal Penalties: Deliberate or fraudulent non-compliance may lead to criminal penalties, including fines up to $10,000 and potential imprisonment.
The FINCEN BOIR filing requirements represent a major step toward increasing corporate transparency and combating financial crimes like money laundering and terrorist financing. While smaller companies may initially find the filing process cumbersome, the benefits in terms of improved compliance and legal operations are significant. By filing the required Beneficial Ownership Information Report, companies can help ensure that they are compliant with federal regulations, avoid penalties, and contribute to a more transparent and secure business environment.
It is essential for businesses to understand the filing requirements, deadlines, and processes associated with the BOIR. Working closely with legal or compliance professionals will ensure that companies meet the regulations efficiently and remain in good standing with FINCEN.