ARTICLE | October 24, 2023
The Beneficial Ownership Information Reporting Rule was passed by the Financial Crimes Enforcement Network (FinCEN) to enhance financial transparency and prevent fraud in the United States. Starting January 1, 2024, businesses will be required to disclose personal information about their beneficial owners to FinCEN. This rule will primarily affect small businesses and is designed to deter illicit financial activities, such as money laundering, tax evasion, and fraud.
Who must report?
The Rule requires both domestic and foreign corporations, limited liability companies (LLCs), limited liability partnerships, business trusts, and other entities created by the filing of a document with the Secretary of State or similar office in the United States to file a report as of January 1, 2024. Existing businesses as of January 1, 2024, will have one year to comply, while those formed after this date must disclose and file the beneficial owner information within thirty days of the entity’s formation. There are 23 exemptions from this filing requirement including public companies, large companies with more than 20 employees and $5 million in revenue, insurance companies, and governmental agencies.
Information to be reported
The required information includes details about the business itself and personal information on anyone controlling 25% or more ownership interests in the company, individuals who exercise substantial control over the company, and individuals who filed or directed the filing of the company’s organizing documents. The personal information required includes the individual’s full name and address, date of birth, and other identifying information like passport number or driver’s license number.
Penalties for non-compliance
Failure to report complete or updated information to FinCEN or attempts to provide false or fraudulent information may result in civil penalties of up to $500 for each day the violation continues. Intentional failure to file may lead to criminal penalties with imprisonment for up to two years.
Benefits of the rule
The rule will enhance the ability of FinCEN and other agencies to protect U.S. national security and the U.S. financial system from illicit use. It will also provide essential information to national security, intelligence, and law enforcement agencies to prevent drug traffickers, fraudsters, and corrupt actors from laundering or hiding money and other assets in the United States.
The Beneficial Ownership Information Reporting Rule is a significant step towards financial transparency and accountability. It also serves as a deterrent for illicit activities by making it harder to hide behind shell companies or complex ownership structures. Businesses should act now to identify whether they fall under the reporting requirements and start preparing for compliance. If your business needs assistance with compliance, our Technical Accounting and Consulting team can help. Contact us today to learn more.
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