On September 29, 2022, the Financial Crimes Enforcement Network (FinCEN) finalized a rule to implement the beneficial ownership information (BOI) reporting requirements of the bipartisan Corporate Transparency Act (CTA). This rule took effect in January 2024 as an attempt to strengthen FinCEN’s and other agencies’ capabilities to safeguard U.S. national security and financial systems from illicit activities. It will provide crucial information to national security, intelligence, and law enforcement agencies, as well as state, local, and Tribal officials, and financial institutions. The goal is to combat money laundering and asset concealment by drug traffickers, fraudsters, corrupt individuals like oligarchs, and proliferators within the United States.
Illicit actors often exploit corporate structures like shell and front companies to conceal their identities and launder money within the United States. These activities not only jeopardize U.S. national security but also pose a threat to economic prosperity. Such companies can obscure the identities of beneficial owners, enabling criminals to engage in illegal transactions that disadvantage compliant small businesses. This rule aims to enhance the integrity of the U.S. financial system by making it more difficult for illicit actors to utilize shell companies for money laundering or asset concealment.
The Importance of the BOI Collection
The collection of Beneficial Ownership Information (BOI) directly benefits law enforcement and authorized users and aids in uncovering criminals who evade taxes, conceal illicit wealth, defraud employees and customers, and undermine legitimate U.S. businesses through the misuse of shell companies.
Reporting Requirements
The rule outlines the obligations for filing a BOI report, detailing who must file, what information is required, and the deadlines for submission. Specifically, it mandates that reporting companies submit reports to FinCEN identifying two groups of individuals: (1) the beneficial owners of the entity. Under the rule, a beneficial owner is defined as any individual who, either directly or indirectly, exercises substantial control over a reporting company, or owns or controls at least 25 percent of the ownership interests of a reporting company. And (2) the company applicants of the entity. The rule specifies that a company applicant consists of two individuals: The person who directly files the document that establishes the entity, or in the case of a foreign reporting company, the document that initially registers the entity to conduct business in the United States; and the individual primarily responsible for directing or controlling the filing of the relevant document by another party. However, the rule does not mandate that reporting companies existing or registered at the time of its effective date identify and report their company applicants. Furthermore, reporting companies formed or registered after this effective date are also not required to update their company applicant information.
For more information, please visit https://www.fincen.gov/boi