How to Verify Beneficial Ownership Information for FinCEN BOIR Reports

The Financial Crimes Enforcement Network (FinCEN), an agency of the U.S. Department of the Treasury, plays a crucial role in safeguarding the U.S. financial system from illicit activities such as money laundering, terrorist financing, and other financial crimes. One of its key initiatives is the Beneficial Ownership Information Reporting (BOI) rule, which mandates certain companies to disclose information about their beneficial owners. This article provides an overview of the FinCEN BOI filing requirements, including who needs to comply, the information that must be reported, and the deadlines for filing.

What is Beneficial Ownership?

Before diving into the FinCEN BOI filing requirements, it’s important to understand what beneficial ownership means. A beneficial owner is an individual who ultimately owns or controls a company or entity, even if their name does not appear on official documents.

For example, an individual who owns or controls 25% or more of a company’s shares or voting power is typically considered a beneficial owner. Additionally, individuals who have significant control over the company’s activities (through the ability to appoint officers, direct financial decisions, or otherwise influence management) are also regarded as beneficial owners.

The goal of the BOI requirement is to provide transparency regarding who is behind entities, thereby reducing the likelihood of financial crimes and improving compliance with regulations such as the Anti-Money Laundering (AML) and Know Your Customer (KYC) rules.

Who Must File the FinCEN BOI Report?

As of January 1, 2024, U.S. businesses, including corporations, limited liability companies (LLCs), and other similar entities, will be required to report their beneficial ownership information to FinCEN, with some exceptions. This requirement applies to both domestic and foreign entities that are registered to do business in the U.S.

However, certain entities are exempt from filing the BOI report. These include:

• Large Operating Companies: Entities with 20 or more full-time employees, over $5 million in gross receipts or sales, and an operating presence in the United States.
• Regulated Entities: Companies that are already regulated and have reporting requirements with other federal or state agencies, such as banks, credit unions, and publicly traded companies.
• Inactive Entities: Companies that are not engaged in active business or that do not hold assets.

In general, if your business does not fall into one of these exempt categories, you will be required to file the BOI report with FinCEN.

Information Required for the BOI Filing

The FinCEN BOI report must include detailed information about the beneficial owners of a company, as well as the company applicants in some cases. The exact information required to be disclosed includes:

1. Beneficial Owners:

• Full Legal Name: The complete name of each individual beneficial owner.
• Date of Birth: The date of birth of each beneficial owner.
• Residential Address: A physical address where the beneficial owner resides.
• Unique Identification Number: This could be a driver’s license number, passport number, or another government-issued identification number.
• Percentage of Ownership: The percentage of ownership or control each beneficial owner has in the entity. This is typically based on voting power or equity ownership.

2. Company Applicants:

• Full Legal Name: The name of the individual who files the formation documents for the company.
• Address and Identification: Similar to beneficial owners, applicants must provide their full name, address, and identification information.

3. Entity Information:

• Company Name and Address: The legal name of the company and its principal business address.
• Taxpayer Identification Number (TIN): The entity’s TIN, often referred to as an Employer Identification Number (EIN).

FinCEN has designed the reporting process to be relatively straightforward, but it requires accurate and up-to-date information to ensure compliance.

Filing Deadlines and Ongoing Requirements

Under the Corporate Transparency Act (CTA), which established the BOI filing requirements, businesses must submit their BOI report to FinCEN within 30 days of registering with a state, or whenever there is a change in the beneficial ownership information.

Additionally, there are ongoing reporting requirements:

• Annual Updates: If there are any changes to the beneficial ownership information (e.g., a change in ownership percentage, or the addition/removal of a beneficial owner), businesses must file an updated BOI report within 30 days of the change.
• Penalties for Non-Compliance: Failure to comply with the BOI filing requirements can result in substantial penalties. Civil penalties for non-compliance can reach up to $500 per day, and criminal penalties can include fines of up to $10,000 and imprisonment for up to two years.

How to File the BOI Report

Filing the BOI report is done electronically through the FinCEN’s secure online system. Businesses will need to create an account with FinCEN to access the system and file the report. The process is relatively simple, but the business must gather all necessary information regarding its beneficial owners and company applicants in advance.

Steps to file the BOI report include:

1. Create an Account: Register for an account with FinCEN’s reporting portal.
2. Prepare the Necessary Information: Gather information about the company, its beneficial owners, and company applicants.
3. Complete the Online Form: Input the required information into the online form on FinCEN’s website.
4. Submit the Report: Review the information for accuracy, and submit the report through the portal.

Once submitted, businesses will receive a confirmation that their BOI report has been filed. It’s important to keep a copy of the confirmation for your records.

Importance of the FinCEN BOI Filing

The FinCEN BOI filing is a significant step toward greater transparency and accountability in the financial sector. By requiring companies to disclose their beneficial owners, the U.S. government is taking important steps to combat financial crimes such as money laundering and tax evasion. This initiative will also help law enforcement agencies track illicit financial flows more effectively.

For businesses, complying with the BOI filing requirements is essential for avoiding penalties and maintaining compliance with U.S. law. While the process may seem burdensome, it is a necessary step toward promoting a safer and more transparent financial environment.

The FinCEN BOI filing requirements are an important part of U.S. financial crime prevention efforts. Understanding who must file boi filing, the information required, and the filing deadlines is crucial for businesses to remain compliant and avoid penalties. As these rules continue to evolve, it’s essential for business owners and corporate leaders to stay informed about any updates to the filing process and ensure that their beneficial ownership information is submitted accurately and on time.