In recent times, the financial landscape has witnessed a significant shift from the implementation of new regulations aimed at enhancing transparency and combating illicit financial activities.
One such regulation that has garnered attention is the requirement for reporting beneficial ownership information. This mandate, enforced by the Financial Crimes Enforcement Network (FinCEN), marks a crucial step in fortifying the integrity of financial systems moving forward. It is a direct result of the 2021 Corporate Transparency Act passed by Congress to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other less-than-transparent ownership structures.
In this article, we will dive deeper into beneficial ownership, its reporting process, and how your business can ensure that you are meeting the legal requirements of the Corporate Transparency Act.
What is Beneficial Ownership and Why Does This Info Need to Be Reported?
Beneficial ownership information refers to the details of individuals who ultimately own or control a legal entity – such as a company in our case. This includes individuals who directly or indirectly hold a significant stake or exercise substantial control over the company’s affairs.
The importance of reporting this information lies in its role in combating money laundering, terrorism financing, tax evasion, and other financial crimes. By disclosing beneficial ownership, authorities can better trace and prevent illicit funds from flowing through opaque corporate structures.
Who Can Access Beneficial Ownership Information?
Access to beneficial ownership information is typically restricted to authorized entities, such as:
- Law enforcement agencies
- Financial institutions conducting due diligence
- Regulatory bodies like FinCEN
These stakeholders utilize this data to conduct investigations, assess financial risks, and ensure compliance with anti-money laundering (AML) and counter-terrorist financing (CTF) measures.
All beneficial ownership information will be stored in a secure, non-public database using meticulous information security methods and other controls commonly found in the Federal government to protect non-classified information that is still considered highly sensitive and deemed the highest security level.
FinCEN will be working closely with those authorized to access beneficial ownership information to make sure those responsible understand how to handle this information in a way that protects its security and confidentiality, so you can rest assured your information is in good hands.
How Will Companies Become Aware of the Beneficial Ownership Information Reporting Requirements?
FinCEN is actively employing a robust outreach and education campaign to help raise awareness of the new reporting requirements. As a part of this program, their Small Entity Compliance Guide can be found here.
FinCEN plans to offer continued guidance, information, and updates related to the Beneficial Ownership Information reporting requirements on its webpage which can be found here.
There is also an option to subscribe if you wish to receive updates via email about FinCEN and reporting obligations if they were to change in the future.
What Does the Beneficial Ownership Information Reporting Process Look Like?
The reporting process for beneficial ownership information involves entities providing comprehensive details about their beneficial owners to FinCEN. This includes personal information such as full name, date of birth, address, and identification numbers.
Furthermore, entities are required to disclose the nature and extent of the beneficial ownership interest held by each individual. The information must be accurate, up-to-date, and submitted within the specified deadlines to ensure compliance with regulatory requirements.
When Do You Need to Report Beneficial Ownership Information?
- A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its beneficial ownership information report.
- A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial Beneficial Ownership Information report. The 90 day deadline runs from the time your company receives notice that its registration is effective or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earliest.
- Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial Beneficial Ownership Information reports with FinCEN.
