NASHVILLE, Tenn. — In an effort to combat money laundering and other financial crimes, the federal government recently passed legislation that will require most small- to mid-sized companies, including laundromats and on-demand laundry services, to document who has a hand in their operations.
It is part of the Corporate Transparency Act (CTA), which became effective January 1. It requires most companies to file what is called a Beneficial Ownership Information (BOI) report with a federal agency called the Financial Crimes Enforcement Network (FinCEN).
The CTA was the topic of a recent webinar, “Beneficial Ownership Reporting is Here: What Small Business Owners Need to Know about the New Reporting Requirements,” hosted by the National Federation of Independent Business (NFIB).
Part 1 of this article examined the CTA and the role FinCEN plays in gathering Beneficial Ownership Information (BOI). Part 2 examined who qualifies as a “beneficial owner” and what information goes into a BOI.
Let’s conclude by detailing where and how to file a BOI, and considering the possible penalties for violations.
WHERE AND HOW TO FILE
So, once a business owner knows they need to file a BOI, where and how does this happen?
“All BOI reports are filed electronically with FinCEN,” says Sandra Feldman, attorney and beneficial ownership information reporting expert with Wolters Kluwer CT Corp. “There is no state filing. You only file with FinCEN. There is no fee, and the report can be filed by anyone the reporting company authorizes to act on its behalf.”
The BOI e-filing portal can be found on the FinCEN website.
“When you go to the portal,” she says, “you will see a couple of options. You can download a PDF, fill it out and then upload it and submit it to FinCEN, or you can use their web-based version, fill the report out online and then submit it.”
There is also the option of using a third-party service provider that will receive the information and submit it on the company’s behalf. While these providers charge a fee, Feldman says potential service advantages include simplified data collection and confidence in the filing.
“However you choose to file your report, you’ll notice that there’s just one BOI report form,” she says. “There aren’t separate forms for initial, updated or corrected reports. You’ll be asked to check a box indicating whether you’re filing an initial report, correcting a prior report, updating a prior report, or if you’re reporting that your company is newly exempt.
“And when you file an update or correction, you have to complete the entire BOI report form. You don’t just provide the updated or corrected information — you resubmit all the information.”
FINCEN IDENTIFIERS
FinCEN also offers something it calls a FinCEN identifier, a number unique to each beneficial owner.
“It is an option that FinCEN gives the beneficial owners and company applicants,” Feldman says, “whereby they can submit an application to FinCEN containing the personal information that’s required to be reported. FinCEN will then (issue) a 12-digit number specific to that individual.”
The beneficial owner or company applicant can give the reporting company that number instead of the required pieces of information. This option could be attractive for someone representing several reporting companies, according to Feldman.
“Instead of having to give multiple companies their personal information and images of their driver’s license or passport, they can just give (them) their FinCEN identifier,” she says.
VIOLATIONS AND PENALTIES
So, what are considered violations, and what are the possible penalties for violating this new requirement?
“Violations include willfully failing to file a complete initial, updated or corrected BOI report,” Feldman says, “and willfully filing or attempting to file false or fraudulent beneficial ownership information.”
A civil penalty of up to $500 for each day the violation continues is possible. Criminal penalties include up to two years imprisonment and a fine of up to $10,000.
“Both individuals and reporting companies can be held liable,” Feldman says, “and individuals can be held liable if a reporting company failed to report complete or updated beneficial ownership information, and that individual either caused the reporting company’s failure or was a senior officer at the time of the failure.”
GETTING READY
Feldman offered some tips for preparing for BOI reporting for owners and other stakeholders.
“First, you should determine if your small business is a reporting company, and therefore has to file a BOI report,” she says. “If you do have a reporting company, you need to identify all of your beneficial owners. The beneficial owners need to be made aware of the requirements of the Corporate Transparency Act, and that their personal information will have to be reported to FinCEN and kept up to date.”
A major element of staying up to date includes putting systems into place.
“You should also start gathering the information that has to be reported and develop a procedure to keep track of all this information to make sure it’s current when you file your initial report,” she says, “and that you’re aware of any changes that will require you to file an updated report.”
To learn more, Feldman suggests visiting the CTA/BOI reporting resources page at https://www.fincen.gov/boi: “They have a lot of really good resources, including a small-entity business guide, FAQs and videos.”
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].
