FinCEN BOIR: How to Determine Beneficial Owners for Your Business

The Financial Crimes Enforcement Network (FINCEN), an agency of the U.S. Department of the Treasury, is tasked with preventing money laundering, terrorist financing, and other financial crimes. One of the key compliance initiatives launched by FINCEN is the Beneficial Ownership Information Reporting (BOIR) requirement. This rule mandates that certain U.S. entities disclose their beneficial owners to FINCEN. The goal is to increase transparency in business ownership structures and help combat illicit financial activities.

In this article, we will explore the BOIR filing requirements, what they entail, who must comply, and how businesses can ensure they meet these obligations.

What is the Beneficial Ownership Information Reporting (BOIR)?

The Beneficial Ownership Information Reporting (BOIR) rule was enacted under the Corporate Transparency Act (CTA), which was signed into law in January 2021 as part of the National Defense Authorization Act (NDAA). The rule requires corporations, limited liability companies (LLCs), and other similar entities registered in the U.S. to disclose information about their beneficial owners to FINCEN.

A beneficial owner is defined as any individual who directly or indirectly exercises substantial control over an entity, or owns or controls at least 25% of the entity’s ownership interests.

The primary purpose of this filing requirement is to create a centralized, secure database that helps law enforcement and other government agencies track the true ownership of businesses. This transparency will make it more difficult for bad actors to use shell companies or complex ownership structures to hide illicit activities.

Who Must File a BOIR?

The BOIR filing applies to most domestic entities (corporations, LLCs, and similar entities) that are registered or created in the U.S. However, there are several exemptions that businesses should be aware of. The filing requirements do not apply to the following entities:

• Large operating companies: These are companies with more than 20 full-time employees, over $5 million in annual revenue, and a physical office in the U.S.
• Certain regulated entities: Entities already regulated by federal agencies, such as banks, credit unions, insurance companies, and registered investment companies, are exempt from the filing requirements.
• Inactive entities: Entities that are not currently conducting business and are dormant may not need to file.
• Large, publicly traded companies: Publicly traded companies that are already subject to SEC reporting requirements are also exempt.

For entities that are not exempt, the BOIR filing must be made by the business itself (not individual owners or third parties) and will require the disclosure of specific information about the company’s beneficial owners.

Key Information Required for BOIR Filing

The BOIR filing requires businesses to provide the following key information about each beneficial owner:

1. Full Legal Name: The name of the individual who qualifies as a beneficial owner.
2. Date of Birth: The individual’s date of birth.
3. Residential Address: The individual’s personal address. This is separate from the business address of the entity.
4. Unique Identifier: This could be a driver’s license number, passport number, or another form of government-issued identification that helps identify the individual.
5. Ownership Interest: The percentage of ownership or control the individual holds in the entity. This is typically determined as any person owning 25% or more of the entity’s shares or voting rights.

For entities with complex ownership structures, the filing may also require details about the individuals who exert significant control or influence over the entity, even if they do not own 25% of the business.

Deadlines for BOIR Filing

The BOIR filing requirements have specific deadlines:

1. Initial Filing: Newly created or registered entities must file their beneficial ownership information with FINCEN at the time of formation or registration. This filing must be made within 30 days of the entity’s formation or registration with the state.
2. Existing Entities: Entities that were created or registered before the implementation of the BOIR rule (which took effect on January 1, 2024) must submit their beneficial ownership information to FINCEN by January 1, 2025.
3. Updates and Changes: Once the initial filing is complete, entities are required to update their filing within 30 days of any changes in beneficial ownership information. This could include changes in ownership percentages, new owners, or updates to contact or identification information.

How to File the BOIR

Filing the BOIR will be done through a secure online portal provided by FINCEN. The information provided will be stored in a non-public database accessible only to authorized government agencies, such as law enforcement and certain regulators. Businesses will need to register for access to this portal before they can submit their filings.

The process involves the following steps:

1. Create an Account: The business must register with the FINCEN database and create a secure account.
2. Enter Beneficial Ownership Information: The business will need to input the required information for each beneficial owner, as outlined in the previous section.
3. Submit the Filing: Once all the required information is submitted, the business will review the filing and submit it through the FINCEN portal.
4. Receive Confirmation: After successful submission, the business will receive confirmation of the filing. This confirmation may be used for record-keeping purposes.

Penalties for Non-Compliance

Failure to comply with the BOIR filing requirements can result in serious penalties. The penalties for not filing or submitting false or incomplete information include:

• Civil Penalties: Businesses may face fines of up to $500 per day for each day the filing is late.
• Criminal Penalties: In cases of willful non-compliance or providing false information, businesses or individuals may face criminal penalties, including fines up to $10,000 or imprisonment for up to two years.

Given the potential legal and financial consequences, it’s critical for businesses to meet their filing obligations promptly.

Why the BOIR Filing Is Important

The Beneficial Ownership Information Reporting requirement is a significant step toward increasing corporate transparency in the United States. By requiring businesses to disclose their beneficial owners, the U.S. government aims to combat money laundering, terrorism financing, and other illicit activities. The BOIR filing is intended to close loopholes that allow criminals to hide behind complex corporate structures and make it harder for bad actors to conceal their identities.

For businesses, complying with the BOIR filing ensures adherence to federal laws, mitigates the risk of penalties, and supports a more transparent business environment.

The FINCEN BOIR filing requirement is an essential compliance measure for businesses in the U.S. that are subject to the Corporate Transparency Act. By understanding the requirements, deadlines, and processes for fincen boir beneficial ownership information, businesses can avoid legal risks and ensure that they are operating within the bounds of U.S. financial regulations. It’s important for companies to act promptly and keep their ownership information up to date to remain compliant with this important initiative.