US Beneficial Ownership Registry: A Major Breakthrough in Transparency by FinCEN
UPDATE – As of December 28, 2024, the CTA’s enforcement is on hold due to the reinstated injunction. Companies are advised to stay informed about ongoing legal proceedings and prepare to comply with reporting requirements once the legal uncertainties are resolved. Consulting with legal or compliance professionals can provide guidance tailored to specific circumstances.
The Corporate Transparency Act (CTA) of 2021 requires many US companies to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Initially, existing companies were to comply by January 1, 2025, while new companies had 90 days from formation to submit their reports.
What Happened?
- December 3, 2024: A federal judge in Texas issued a nationwide injunction, halting the enforcement of the CTA due to constitutional concerns. The Wall Street Journal
- December 23, 2024: The Fifth Circuit Court of Appeals lifted the injunction, reinstating the CTA’s reporting requirements. In response, FinCEN extended the reporting deadline for existing companies to January 13, 2025. The Wall Street Journal
- December 27, 2024: The Fifth Circuit reinstated the nationwide injunction, once again pausing the enforcement of the CTA. FinCEN announced that, during this period, companies are not required to file beneficial ownership information and will not face penalties for non-compliance. However, voluntary submissions are accepted. Reuters
Why is BOI Filing Important?
The Financial Crimes Enforcement Network (FinCEN) launched the Beneficial Ownership Information Registry on January 1st, 2024.
The Corporate Transparency Act of 2021 requires all registered companies in the United States to report their beneficial owners’ details within 90 days of formation. This act promotes transparency and combats financial crimes.
What is the Beneficial Ownership Information Registry?
The Beneficial Ownership Information Registry is an online platform that allows businesses to report information about their beneficial owners. The registry is managed by FinCEN, a bureau of the US Department of the Treasury responsible for combating money laundering and other financial crimes.
Purpose of BOI Registry
Before the implementation of the Beneficial Ownership Information Registry, the United States had limited regulations in place regarding the disclosure of beneficial owners of companies. This lack of transparency often made it easier for individuals with malicious intent to hide their identities behind anonymous shell companies. These entities could be used to engage in various illicit activities such as money laundering, fraud, and terrorist financing. The new rules introduced by the Corporate Transparency Act of 2021 represent a significant step forward in addressing these concerns and promoting greater transparency in corporate ownership.
The creation of the Beneficial Ownership Information Registry aims to enhance transparency in corporate ownership and prevent the misuse of anonymous shell companies for illegal activities. By requiring businesses to disclose the names, birthdates, addresses, and identification details of their beneficial owners, the government aims to deter criminals from using these entities for money laundering, fraud, or other illicit purposes.
What Needs to Be Reported?
Businesses are required to provide the following information about their beneficial owners:
- Full legal name
- Date of birth
- Residential or business address
- Identification number (such as a social security number or passport number)
It is important to note that this reporting requirement is a one-time obligation. Updates are only necessary in case of changes to the beneficial ownership structure of a company.
Stay Compliant and Informed!
To ensure compliance with the Beneficial Ownership Information Registry, businesses should familiarize themselves with the reporting requirements and deadlines. It is recommended to visit FinCEN’s website for detailed information and guidelines on how to fulfill these obligations. Greenback’s tax preparers encourage their clients to consult with legal and tax professionals for personalized guidance based on their specific situation.
At Greenback, we are committed to keeping our clients informed about important updates and regulatory changes that may impact their businesses. Stay tuned for more updates from us regarding the US Beneficial Ownership Registry and other relevant topics in the future.
