If you own or control a company in the United States, you may have heard of the BOI Reporting Rule. This is a new regulation that requires certain companies to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
However, you may be wondering: what exactly is a beneficial owner and why does FinCEN need this information?
Below, we will explain the basics of the BOI Reporting Rule, its purpose, and its implications for your business.
What is the BOI Reporting Rule?
In essence, the Beneficial Owner Information (BOI) Reporting Rule aims to enhance the transparency and accountability of the U.S. financial system by preventing the misuse of corporate entities by illicit actors, such as money launderers, tax evaders, terrorists, and corrupt officials.
The rule requires reporting companies, which are generally corporations, limited liability companies, and similar entities created or registered to do business in the U.S., to file reports with FinCEN that identify two categories of individuals:
- The beneficial owners of the entity, who are the natural persons who directly or indirectly own or control at least 25% of the ownership interests of the entity or exercise substantial control over the entity; and
- The company applicants of the entity, who are the natural persons who file an application to form or register the entity or to update the entity’s information with the state.
The reports must include the name, date of birth, current address, and unique identifying number (such as a passport number) of each beneficial owner and company applicant. Reporting companies must file their initial reports and make sure to update them if the reported information changes after the initial filing.
Why Does FinCEN Need This Information?
FinCEN is the U.S. Financial Intelligence Unit that combats money laundering, terrorist financing, and other financial crimes. FinCEN collects and analyzes information from various sources, such as banks and other financial institutions, and shares it with law enforcement, regulators, and other partners.
One of the challenges that FinCEN and its partners face is the lack of reliable and accessible information about the beneficial owners of companies.
Illicit actors often use complex and opaque corporate structures to hide their identities and assets, evade taxes, launder money, finance terrorism, and commit other crimes. These activities pose a serious threat to the national security and economic prosperity of the United States.
By collecting and maintaining beneficial ownership information in a secure and searchable database, FinCEN will be able to provide timely and accurate information to authorized users – such as law enforcement, tax authorities, financial institutions, and other reporting companies – to help them detect and prevent financial crimes, enforce sanctions, and protect the integrity of the U.S. financial system.
What Are the Implications for Your Business?
If your business is a reporting company under the BOI Reporting Rule, you will need to comply with the reporting requirements and keep your information up to date. Failure to do so may result in civil and criminal penalties, including fines and imprisonment.
However, complying with the BOI Reporting Rule may also bring some benefits for your business, such as:
- Reducing the risk of being involved in illicit transactions or associated with bad actors, which could damage your reputation and expose you to legal liability;
- Simplifying the due diligence process and reducing the compliance costs when opening bank accounts, obtaining loans, or engaging in other financial transactions, as financial institutions will be able to verify your beneficial ownership information with FinCEN;
- Enhancing your credibility and trustworthiness with your customers, suppliers, investors, and other stakeholders, who may value your transparency and accountability.
How We Can Help You
At Jurado & Associates, P.A., we understand that the BOI Reporting Rule may seem complex and burdensome, especially if you have multiple entities or ownership structures. That is why we are here to help you navigate the rule and ensure your compliance. We have the expertise and experience to assist you with:
- Determining if your business is a reporting company and identifying your beneficial owners and company applicants;
- Preparing and filing your initial and updated reports with FinCEN;
- Obtaining a FinCEN ID for yourself or your beneficial owners, if needed; and
- Responding to requests or inquiries from FinCEN, law enforcement, or other authorized users regarding your beneficial ownership information.
If you have any questions or concerns about FinCEN or your beneficial ownership information, please do not hesitate to contact us. You can reach us by phone at (305) 921-0976, by email at [email protected], or by WhatsApp at +1 (305) 921-0976.
