Beneficial Ownership Information Reporting Rules

In a global landscape that places a premium on transparency and combating financial crime, regulatory bodies are continually refining their frameworks. The Financial Crimes Enforcement Network (FinCEN) has recently implemented new rules regarding Beneficial Ownership Information Reporting.

On January 1, 2024 the rule requiring beneficial ownership information (BOI) reporting under the Corporate Transparency Act went into effect.  As originally written, the BOI reporting rule provided that a domestic reporting company created on or after January 1, 2024 or a foreign reporting company first registered on or after January 1, 2024 must file its initial beneficial ownership information report with the FinCEN within 30 calendar days of receiving notice of its creation or registration.

On November 29, 2023, FinCEN issued a final rule to extend the deadline for filing initial beneficial ownership Information reports for domestic and foreign reporting companies created or registered to do business in the United States on or after January 1, 2024 and before January 1, 2025 from within 30 calendar days of receiving notice of its creation or registration to within 90 calendar days of receiving notice of its creation or registration.

Understanding Beneficial Ownership:

Beneficial ownership refers to the individuals who ultimately own or control a legal entity, such as a company. The disclosure of beneficial ownership is a critical tool in preventing illicit financial activities, money laundering, and the financing of terrorism.

Key Changes in FinCEN's Reporting Rules:

Expanded Definition of Beneficial Owner:

• FinCEN's new rules broaden the definition of beneficial owners to include individuals who have substantial control over the legal entity, not just those with significant ownership interests. This expansion aims to capture a more comprehensive view of those who influence or control business decisions.

Reporting Requirements for Reporting Companies:

• Certain entities, known as "reporting companies," are required to submit beneficial ownership information to FinCEN. This includes details such as names, addresses, dates of birth, and Social Security numbers of beneficial owners.

Recordkeeping Obligations:

• Reporting companies are now obligated to maintain records of beneficial ownership information for a period of five years after the entity is dissolved. This ensures that historical data is accessible for regulatory purposes.

Increased Penalties for Non-Compliance:

• FinCEN has imposed substantial penalties for non-compliance with the reporting rules. Businesses failing to meet their obligations may face severe financial consequences, emphasizing the importance of adhering to the new regulations.