How to Avoiding Common Mistakes in FinCEN BOIR Filing

The Financial Crimes Enforcement Network (FinCEN) plays a critical role in combatting money laundering, terrorist financing, and other illicit financial activities. One of its key initiatives, the Beneficial Ownership Information Reporting (BOIR) requirements, is designed to increase transparency in corporate ownership structures. These requirements ensure that individuals who own or control businesses are properly identified, reducing opportunities for anonymity to be misused in financial crimes.

This article provides an overview of the FinCEN BOIR filing requirements, including who must file, what information must be reported, deadlines, and the implications of non-compliance.

What is BOIR?

The Beneficial Ownership Information Reporting (BOIR) requirements were established under the Corporate Transparency Act (CTA), a component of the Anti-Money Laundering Act of 2020. These requirements mandate that certain entities disclose information about their beneficial owners to FinCEN. The goal is to prevent the misuse of anonymous corporate entities by ensuring that their real owners are known to regulatory authorities.

What is a Beneficial Owner?

A beneficial owner is an individual who:

• Exercises substantial control over an entity, or
• Owns or controls 25% or more of the entity’s equity interests.

This definition ensures that individuals with significant influence or stake in a company are identified.

Who Must File BOIR?

The BOIR filing requirements apply to certain entities, primarily those that are registered to do business in the United States. However, there are some exemptions.

Entities Required to File

The following types of entities must file BOIR reports:

• Corporations
• Limited Liability Companies (LLCs)
• Other similar entities formed under state or tribal law.

Exemptions

Not all entities are subject to BOIR requirements. Common exemptions include:

• Publicly Traded Companies: Entities registered with the Securities and Exchange Commission (SEC).
• Government-Owned Entities: Entities wholly owned by state or federal governments.
• Large Operating Companies: Entities with more than 20 full-time employees, over $5 million in gross receipts or sales, and a physical operating presence in the U.S.

Other exemptions may apply, depending on the specific circumstances of the entity.

What Information Must Be Reported?

Entities required to file must provide detailed information about their beneficial owners and the company itself.

Beneficial Owner Information

For each beneficial owner, the following details must be reported:

1. Full Legal Name
2. Date of Birth
3. Current Residential or Business Address
4. Unique Identifier: Such as a passport or driver’s license number, along with a copy of the identification document.

Entity Information

The reporting entity must provide:

1. Legal Name of the Entity
2. Trade or DBA Names (if applicable)
3. Principal Business Address
4. State or Tribal Jurisdiction of Formation
5. Tax Identification Number (TIN) or similar identifier.

Filing Deadlines

Deadlines for BOIR filings depend on whether the entity is newly formed or already existing:

New Entities

• Must file their BOIR report within 30 calendar days of formation or registration.

Existing Entities

• Existing entities registered before the effective date of the BOIR rules (January 1, 2024) must file their initial report by January 1, 2025.

Updates and Corrections

• Changes in beneficial ownership or inaccuracies in previously filed reports must be updated within 30 days of the change.

Penalties for Non-Compliance

Failing to comply with FinCEN’s BOIR requirements can lead to severe penalties, including:

• Civil Penalties: Up to $500 per day for each day the violation continues.
• Criminal Penalties: Fines up to $10,000 and/or imprisonment for up to two years for willful violations.

Businesses are encouraged to ensure accurate and timely reporting to avoid these consequences.

Importance of BOIR Compliance

The BOIR requirements aim to enhance transparency and deter financial crimes by providing law enforcement and regulators with critical ownership information. Compliance benefits businesses by:

1. Reducing Risks: Preventing association with illicit activities that could damage a company’s reputation.
2. Strengthening Trust: Enhancing transparency to foster trust among investors, partners, and customers.
3. Avoiding Legal Risks: Ensuring adherence to federal regulations to avoid penalties and legal scrutiny.

How to File a BOIR Report

Reports must be filed electronically through FinCEN’s online reporting system. Businesses should:

1. Gather all necessary information about beneficial owners and the entity itself.
2. Create an account on the FinCEN reporting portal.
3. Submit the required information through the online system.

FinCEN provides resources and guidance to help entities navigate the reporting process, including FAQs and technical support.

Tips for Ensuring Compliance

To meet BOIR filing requirements, businesses should:

1. Conduct Regular Reviews: Periodically review ownership structures to identify beneficial owners.
2. Maintain Records: Keep up-to-date records of beneficial ownership details and documentation.
3. Seek Legal Advice: Consult with legal or compliance experts to ensure accurate reporting and adherence to the law.
4. Educate Stakeholders: Ensure that all relevant parties understand the importance of BOIR compliance.

FinCEN’s BOIR requirements represent a significant step toward enhancing corporate transparency and combating financial crime. Businesses must familiarize themselves with the reporting rules, gather the necessary information about beneficial owners fincen boir, and file accurate and timely reports to remain compliant. By doing so, they not only avoid penalties but also contribute to a more transparent and secure financial system.