Jeremy L. Krenek, Esq.
Jeremy@lakesidelawyerspllc.com
July 10, 2024
Via email only to all corporate clients
Re: FinCEN Reporting Requirements
Dear Lakeside Lawyers Client:
The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the United States Department of Treasury, exchanges information with foreign financial intelligence units around the world in support of U.S. and foreign financial crime investigations. Put simply, they investigate and prosecute money launderers. You may be familiar with the form that you have to fill out at the bank if you deposit more than Ten Thousand Dollars ($10,000) cash at a time. FinCEN has now implemented a new Reporting Rule for companies which became effective January 1, 2024.
The Reporting Rule requires certain entities to file beneficial ownership information (“BOI”) reports to FinCEN. Reports contain information about the entity itself and two categories of individuals: (1) beneficial owners; and (2) company applicants. A beneficial owner is an individual who controls at least Twenty-Five Percent (25%) of a company or has substantial control[1] over the company. A company applicant is an individual who directly files or is primarily responsible for the filing of the document that creates or registers the company[2].
Starting on January 1, 2024, BOI reports must be filed electronically using FinCEN’s secure filing system. According to FinCEN, “FinCEN will store BOI reports in a centralized database and only share this information with authorized users for purposes specified by law. The database will use rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level.”
Deadline to File
Reporting companies created or registered to do business before January 1, 2024, will have until January 1, 2025, to file their initial BOI reports.
Reporting companies created or registered on or after January 1, 2024, and before January 1, 2025, have 90 calendar days after receiving actual or public notice that their company’s creation or registration is effective to file their initial BOI reports. Specifically, this 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office provides public notice of its creation or registration, whichever is earlier.
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 BOI reports.
Am I required to file the Report?
Unless exempt, all “reporting companies” must file the BOI reports with FinCEN within the above-described timeframes. “Reporting companies” include all corporations and limited liability companies (LLCs) unless such company qualifies for an exemption. FinCEN exempts twenty-three (23) specific types of entities from the reporting requirements as set forth in the chart below:
As you can see, the majority of the exempt entities are types of entities that already have reporting and regulatory requirements.
Required Information Required to Be Reported
Below is a chart showing the required information that must be reported on the BOI to FinCEN:
How To File the Report
If your company is required to file a BOI report, you must do so electronically through a secure filing system. FinCEN has published instructions and other technical guidance on how to complete the BOI report form at www.fincen.gov/boi. If you are unable to electronically file a BOI report through FinCEN’s secure filing system, you should contact FinCEN at www.fincen.gov/contact.
Duty to Correct and Update
In addition to filing an initial BOI report, reporting companies must also update and correct information in their previously filed BOI reports.
What Happens if I Don’t File the BOI?
Should a person willfully fail to report complete or updated beneficial ownership information to FinCEN as required under the Reporting Rule, FinCEN will determine the appropriate enforcement response in consideration of its published enforcement factors. The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure. Additionally, a person may be subject to civil and/or criminal penalties for willfully causing a company not to file a required BOI report or to report incomplete or false beneficial ownership information to FinCEN.
Additional information about the Reporting Rule and guidance materials are available at www.fincen.gov/boi.
| Sincerely, /s/ Jeremy L. Krenek Jeremy L. Krenek, Esq. |
[1] An individual exercises substantial control over a reporting company if the individual meets any of the following criteria: (1) the individual is a senior officer; (2) the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company; (3) the individual is an important decision-maker; or (4) the individual has any other form of substantial control over the reporting company.
[2] A reporting company is not required to report its company applicants if it is a domestic company reporting a company created before January 1, 2024.
