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Editor’s Note: The ACAMS moneylaundering.com legal team covers a U.S. bureau’s publications on impending beneficial ownership requirements in the runup to the first reporting deadline.

By Leily Faridzadeh, Senior Legal Writer

On Monday, Jan. 1, U.S. officials began requiring certain categories of legal entities to submit beneficial ownership information, or BOI, amid a broader, global effort to prevent “bad actors” from using corporate opacity to shield illicit and undeclared income.

Pursuant to the requirement, limited liability companies and other entities formed on or after Jan. 1 but before Jan. 1, 2025, must file BOI on anyone who owns at least 25 percent of their shares or manages their operations to the Financial Crimes Enforcement Network, also known as FinCEN, within 90 days of their formation or registration.

Those formed or registered prior to Monday will have until Jan. 1, 2025, to file.

FinCEN estimates that nearly 33 million legal entities will have to collect and submit the names, addresses, social security numbers and other personal details of their owners and controllers in the first 12 months after the requirement comes into force, with an additional 5 million entities  submitting their BOI in each of the nine years that follow.

The bureau clarified in September that determining whether a legal entity triggers or is exempt from the reporting obligation is fact and case specific.

FinCEN disclosed plans to extend the original 30-day reporting deadline for companies formed or registered on or after Jan. 1, 2024, but before Jan. 1, 2025, from 30 days to 90 days in September, and finalized the longer filing window in November.

Companies formed or registered after Jan. 1, 2025, are obligated to file BOI reports 30 days after their formation or registration.

The extended deadline won backing from federal lawmakers and national trade associations such as the American Bankers Association and American Institute for Certified Public Accountants.

The Independent Community Bankers Association of America wanted the bureau to apply the new 90-day reporting deadline to businesses formed on or after Jan. 1, 2025. Small business advocates and their backers in Congress wanted the reporting obligation delayed altogether.

Form and process

On Sept. 28, 2023, FinCEN requested feedback on potentially revising the form for submitting BOI, including by no longer giving entities the option of identifying their beneficial owners as “unknown.”

FinCEN also sought feedback on the proposed “FinCEN Identifier,” a unique identifier that companies can reference in certain cases in lieu of submitting BOI. On Nov. 7, 2023, the bureau formally specified the circumstances that must exist for a company to submit an identifier.

In preparation for the rule’s entry into force, FinCEN has issued guidance on the definition of “beneficial owners,” “company applicants” who may also need to be identified, and potentially exempt entities such as banks, brokerages and credit unions.

A list of frequently asked questions updated Dec. 12 offers further instructions for entities seeking to identify their beneficial owners and individuals who exercise “substantial control” over their operations.

The FAQs also provide clarity on “company applicants”—individuals who directly file the documents that create or register an entity with the local secretary of state or similar office.

FinCEN has also issued fact sheets, brochures and other forms of guidance to help clarify affected companies’ obligations.

The bureau released a “Small Entity Compliance Guide,” most recently updated on Dec. 1, 2023, with charts to aid in the determination of whether a business triggers the requirements, after emphasizing in a webcast eight months prior that reporting entities must keep their BOI current.

To avoid penalties, reporting companies must correct inaccurate information by filing a report within 30 days of learning of the inaccuracy.

Individuals who either willfully fail to file accurate and complete BOI or update and correct their information within 90 days face either a maximum civil penalty of $500 for each day the violation goes uncorrected, or criminal penalties as high as $10,000 and possible imprisonment.

Filers must submit their BOI electronically, according to FinCEN, which will store the details on the Beneficial Ownership Secure System, a secure, national database that the bureau constructed and now administers pursuant to the Corporate Transparency Act.

Despite FinCEN’s efforts to simplify and clarify reporting obligations, complications and uncertainties—including a potential government shutdown and an ongoing lawsuit filed on constitutional grounds—remain intact.

FinCEN has also warned of potentially fraudulent solicitations by those seeking to harvest confidential information from individuals and entities subject to the reporting requirements.

Contact Leily Faridzadeh at lfaridzadeh@acams.org