FinCEN to U.S. Small Businesses: Report Beneficial Ownership Information to Stop Bad Actors

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FinCEN Director Andrea Gacki recently met with small business owners to spread the word on the Corporate Transparency Act (CTA). The new transparency law became effective January 1 of this year and impacts most U.S. small businesses.

What Is FinCEN?

The Financial Crimes Enforcement Network, or FinCEN, is a bureau of the U.S. Department of the Treasury that plays a vital role in combating financial crimes like money laundering and terrorist financing.

As Director Gacki explained, “FinCEN issues regulations to combat money laundering, terrorist financing, and other forms of illicit finance. Those regulations require that approximately 300,000 financial institutions report timely and accurate information under the Bank Secrecy Act regarding suspicious activity and certain transactions.

“We then provide access to this information to law enforcement and other national security agencies. This helps law enforcement investigate serious crimes like narcotrafficking, human trafficking, fraud, and identity theft.”

What Is The Corporate Transparency Act?

Director Gacki told small business owners, “The Corporate Transparency Act ... is an important piece of the puzzle as we work to stop bad actors from exploiting the U.S. financial system.”

The Corporate Transparency Act was passed in the United States in 2021 and became effective January 1, 2024. The law requires certain reporting companies to file beneficial ownership information (BOI) reports with FinCEN.

What is a beneficial owner? Per the CTA, beneficial owners are individuals who ultimately own or control at least 25% of a company's ownership interest, have significant influence over the company, or receive substantial economic benefits from its assets.

Which companies are required to report? Mostdomestic corporations, limited liability companies (LLCs), and similar entities formed in the U.S are required to report. There are some exemptions for certain types of businesses, such as large operating companies, publicly traded companies, or businesses within certain highly regulated industries.

How Do I File Beneficial Ownership Information?

Companies that are required to report should file beneficial ownership information electronically through FinCEN’s website. There is no fee for submitting your beneficial ownership information report to FinCEN.

Why Is It Important For Small Businesses To Report Beneficial Owners?

In her remarks, FinCEN Director Gacki addressed a question many business owners are asking: Why is it so important for small businesses to report beneficial owners, the real people behind their companies?

“Terrorist financiers, drug kingpins, and other criminals use anonymous corporate structures to launder, move, and hide illicit funds into and through the United States ... Human trafficking, fraud schemes, elder abuse, narcotraffickers, ransomware attackers, and other bad actors often rely on anonymous shell companies to facilitate these serious crimes.”

“In 2021, Congress enacted the bipartisan Corporate Transparency Act, or CTA, to help law enforcement fight this illicit activity. The CTA peels back the layers of anonymity by requiring many companies doing business in the United States to report information to FinCEN about their beneficial owners – in other words, the real people who own or control them.”

“The information is housed in a secure, non-public database, and we’ve set rigorous standards around access and data-sharing to ensure that only authorized recipients can obtain beneficial ownership information.”

What Are The Penalties For Violating The Corporate Transparency Act?

“Small business owners doing their best to comply with the law should not lose sleep over these new reporting requirements,” Director Gacki reassured the audience.

“The CTA penalizes willful violations of the law, and this is where we plan to focus our enforcement actions. It’s not a ‘gotcha’ exercise, and we’re not looking to needlessly burden America’s thriving small business community.

“As more legitimate and law-abiding businesses comply with the requirements and report beneficial ownership information, bad actors will increasingly be forced into tough choices that jeopardize their ability to perpetuate crime undetected.”

In other words, greater transparency means fewer opportunities for wrongdoers to hide their criminal activity.

Have You Made Your Report To FinCEN?

If your company was created before January 1, 2024, you will have one year to submit the required information via the FinCEN website.

If you register your company with the Secretary of State on or after January 1, 2024, you will have either 30 or 90 days to comply with the reporting requirements, depending on when your entity is formed.

Read our blog article “Small Business Owners: New Federal Reporting Requirements Start January 1” to learn more about which businesses must report ownership information and by when.

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