FinCEN BOIR Filing Requirements for Foreign-Owned Entities

The Financial Crimes Enforcement Network (FinCEN), an agency within the U.S. Department of the Treasury, plays a crucial role in combating money laundering, terrorist financing, and other financial crimes. To support its efforts, FinCEN has implemented various reporting requirements, including the Beneficial Ownership Information Reporting (BOIR) requirements. These rules, introduced as part of the Corporate Transparency Act (CTA), are designed to increase transparency in the ownership structures of companies operating in the United States.

In this article, we will provide a detailed overview of the FinCEN BOIR filing requirements, including who must file, what information needs to be reported, the filing process, and the potential consequences of non-compliance.

What is FinCEN’s BOIR Requirement?

The Beneficial Ownership Information Reporting (BOIR) requirement mandates that certain entities in the United States disclose information about their beneficial owners and company applicants to FinCEN. The aim of this requirement is to enhance transparency by revealing who owns and controls companies, particularly those that may engage in illicit financial activities such as money laundering, tax evasion, or other financial crimes.

The BOIR filing requirement is part of the Corporate Transparency Act, which was enacted in January 2021 and requires reporting of beneficial ownership information to FinCEN by certain reporting companies. The goal is to create a centralized database of beneficial ownership information that law enforcement, financial institutions, and other authorized parties can access to assist in investigations and due diligence processes.

Who Must File the BOIR?

Under the Corporate Transparency Act, certain entities must file a BOIR with FinCEN. These entities are referred to as reporting companies and are required to provide details about their beneficial owners and company applicants.

1. Reporting Companies:

Reporting companies include most types of domestic and foreign entities registered to do business in the United States, unless they fall into one of the following exemptions:

  • Large Operating Companies: Businesses that have more than 20 employees, more than $5 million in annual revenue, and a physical presence in the U.S. (e.g., a brick-and-mortar office).
  • Highly Regulated Entities: Entities that are already subject to substantial regulation or oversight, such as large public companies, regulated banks, credit unions, registered investment companies, and certain other financial institutions.
  • Inactive Entities: Businesses that do not engage in any ongoing operations (e.g., dormant companies) or have minimal assets.
  • Certain Entities: Certain regulated entities, such as accounting firms or law firms, that are subject to specific regulations and do not pose significant risks for financial crime.

2. Exemptions:

While most reporting companies must file the BOIR, there are exemptions for certain entities that do not meet the regulatory criteria. These typically include entities with significant size and complexity that already comply with other stringent reporting and regulatory requirements, such as public companies or regulated financial institutions.

What Information Must Be Reported?

The BOIR requires reporting companies to disclose detailed information about their beneficial owners and company applicants. Below is a breakdown of the information that must be included in the filing:

1. Beneficial Owners:

A beneficial owner is defined as an individual who, directly or indirectly, owns or controls 25% or more of the company or has substantial control over the company. For each beneficial owner, the following information must be reported:

  • Full legal name
  • Date of birth
  • Current residential or business address
  • Unique identification number (e.g., passport number, driver’s license number, or a similar government-issued document) and the issuing country

2. Company Applicants:

A company applicant refers to the individual who files the formation documents for the company or registers the company to do business in the United States. For each company applicant, the following information is required:

  • Full legal name
  • Date of birth
  • Residential or business address
  • Unique identification number

3. Updates and Changes:

Once the initial BOIR filing has been made, companies must keep their information up-to-date. If there are any changes in the beneficial ownership or applicant details, they must be reported to FinCEN within 30 days of the change.

How to File the BOIR

The BOIR filing must be submitted electronically to FinCEN through its secure online portal. The filing process involves completing a series of forms and providing the necessary beneficial ownership and company applicant information.

Steps for filing:

  1. Create a FinCEN Account: To file, the company must first register for an account on FinCEN’s Bureau of the Fiscal Service portal.
  2. Enter Required Information: The reporting company will need to input the required information about its beneficial owners and company applicants.
  3. Submit the Report: After the information is entered, it must be reviewed for accuracy before submission. Once submitted, FinCEN will process the filing.
  4. Receive Confirmation: After the filing is completed successfully, the company will receive a confirmation that the report has been filed.

Deadlines for BOIR Filing

The BOIR filing must be submitted within a specific timeline based on the type of entity:

  • Existing Entities: Existing companies that were formed before the January 1, 2024 effective date of the BOIR rules must file their initial reports by January 1, 2025.
  • New Entities: Entities formed after the effective date must file their BOIR within 30 days of incorporation or registration.

After the initial filing, updates must be made within 30 days if there are any changes to the reported information.

Penalties for Non-Compliance

Failure to comply with the BOIR filing requirements can result in significant penalties. Entities that do not file the required beneficial ownership information, or who provide false or incomplete information, may face:

  • Civil Penalties: Fines of up to $500 per day for failure to file or update the required information.
  • Criminal Penalties: Willfully providing false information or failing to comply with reporting requirements can result in criminal penalties, including fines and potential imprisonment.

Non-compliance can also damage a company’s reputation and hinder its ability to do business with financial institutions, government agencies, or other regulated entities.

The FinCEN boir filing requirements are part of a broader effort to increase transparency in corporate ownership structures and combat financial crimes such as money laundering and tax evasion. By requiring businesses to disclose information about their beneficial owners and company applicants, the Corporate Transparency Act helps ensure that law enforcement and financial institutions can more effectively track illicit financial activity.

It is crucial for businesses to understand the reporting requirements, file on time, and maintain accurate and up-to-date information. Failure to do so can result in severe penalties and other legal consequences. By complying with these regulations, companies can contribute to a safer, more transparent business environment while avoiding costly fines and penalties.