The Financial Crimes Enforcement Network (FinCEN) has implemented stringent regulations requiring businesses to file Beneficial Ownership Information (BOI) reports as part of its broader strategy to combat money laundering, terrorism financing, and other financial crimes. The Corporate Transparency Act (CTA), passed as part of the National Defense Authorization Act for Fiscal Year 2021, mandates that certain entities report their beneficial owners to FinCEN. BOI reporting requirements are effective as of January 1, 2024. Non-compliance with this requirement can lead to significant penalties, highlighting the importance for businesses to understand and adhere to these regulations.

Understanding Beneficial Ownership Information Requirements

A beneficial owner is defined as an individual who directly or indirectly owns or controls 25% or more of an entity or who exercises substantial control over the entity. The BOI report must include specific information about each beneficial owner, such as their full legal name, date of birth, residential address, and an identifying number from an acceptable identification document (like a passport or driver’s license).

Entities required to file these reports include corporations, limited liability companies (LLCs), and other similar entities formed or registered to do business in the United States. However, there are exceptions for larger entities, regulated businesses, and inactive entities that meet specific criteria.

Penalties for Non-Compliance

Failing to file a BOI report, filing an incomplete report, or providing false information can result in severe penalties:

1. Civil Penalties: Entities that fail to comply with the BOI reporting requirements may face civil penalties of up to $500 per day until the violation is corrected. This can accumulate rapidly, leading to substantial financial burdens for non-compliant businesses.
2. Criminal Penalties: Willfully providing false or fraudulent beneficial ownership information, or willfully failing to file a report, can result in criminal penalties. Individuals responsible for such violations can face fines up to $10,000 and/or imprisonment for up to two years.
3. Increased Scrutiny & Investigations: Non-compliance can trigger additional scrutiny from regulatory and law enforcement agencies. Businesses may be subjected to thorough investigations, audits, and increased monitoring, potentially disrupting operations and damaging reputations.

Steps to Ensure Compliance

Given the serious implications of non-compliance, businesses must take proactive measures to adhere to BOI reporting requirements:

• Understand Reporting Obligations: Entities should thoroughly understand whether they fall under the reporting requirements and identify their beneficial owners accurately.
• Maintain Accurate Records: Keeping detailed and up-to-date records of beneficial ownership information is crucial for compliance and for the timely submission of accurate reports.
• Implement Compliance Programs: Establishing robust internal compliance programs and training staff on BOI reporting requirements can help ensure timely and accurate filings.
• Seek Legal & Professional Advice: Consulting with legal and financial professionals can provide valuable guidance and help businesses navigate the complexities of the BOI reporting requirements.

The penalties for failing to file Beneficial Ownership Information reports with FinCEN are designed to be stringent, reflecting the importance of these reports in the fight against financial crimes. Businesses must recognize the critical nature of these requirements and take the necessary steps to comply. By doing so, they not only avoid significant penalties but also contribute to a more transparent and secure financial system.

Want to avoid penalties and potentially costly mistakes? Let Propel file your BOI report for you! Our team of business compliance specialists can give you peace of mind by staying on top of ongoing FinCEN requirements on behalf of your business – so you can instead focus on the work at hand. Simply say hello and speak with an expert today!