- The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a final rule implementing the beneficial ownership information (BOI) reporting requirement of the Corporate Transparency Act (CTA), passed by Congress as part of the Anti-Money Laundering Act of 2020. It requires certain domestic and foreign entities to submit specified beneficial ownership information to the Financial Crimes Enforcement Network on or before Jan. 1, 2024.
- According to FINCEN it will significantly help the U.S. law enforcement, tax authorities and financial institutions to protect the U.S. financial system from illicit use that undermines U.S. national security and foreign policy interests.
A corporation, limited liability company (LLC), or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. A corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. FinCEN expects limited liability partnerships, limited liability limited partnerships, business trusts and most limited partnerships to submit BOI reports, considering such entities are generally created by a filing with a secretary of state or similar office. Certain entities are excluded from the definition of a “reporting company” to the extent that they are not created by a filing with a secretary of state or similar office.
23 entities are exempted including governmental authorities, banks, depository institution holding companies, money services businesses, brokers or dealers in securities and accounting firms. These exempted entities also include certain large operating companies that meet certain employment and/or tax reporting criteria and publicly traded companies that are issuers of securities that are registered under Section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l)
The reporting company to submit the following information to FinCEN for itself: 1) full legal name, 2) any trade name, 3) current address, 4) the jurisdiction of formation, and 5) the Internal Revenue Service Taxpayer Identification Number (TIN) (including an Employer Identification Number) of the reporting company, or where a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction. Reporting companies with a principal place of business in the U.S. must provide the street address of such principal place of business; while reporting companies with a principal place of business outside of the U.S. must provide the street address of the primary location in the U.S. where their business is conducted.
When Disclosures Must Be Made
Jan. 1, 2024 but reporting companies created or registered before Jan. 1, 2024, will have one year (until Jan. 1, 2025) to file their initial reports, while reporting companies created or registered after Jan. 1, 2024, will have 30 days after receiving notice of their creation or registration to file their initial reports. Reporting companies have 30 days to report changes to the information in their previously filed reports and must correct inaccurate information in previously filed reports within 30 days of when the reporting company becomes aware or has reason to know of the inaccuracy of information in earlier reports. Importantly, the final rule no longer requires reporting companies created or registered prior to Jan. 1, 2024, to submit BOI for company applicants. Rather, such reporting companies will only have to submit information required for reporting companies and beneficial owners.
This law is considered be one of the most significant changes in corporate law passed in many years. The reason is that it will likely reveal illicit entities laundering funds in the US, or violating state and federal laws and regulations while shielding the owners through hidden beneficiaries. The disclosure requirements will make it much more difficult to hide assets and nearly impossible to funnel moneys to true owners without disclosure. Tax evasion will be much more difficult. The amount of spying and stealing secrets from our governmental agencies has increased and these disclosures will also reveal if companies are owned by members of foreign governments or their families. It will also inhibit spying on the United States through companies established here through foreign nations who are doing business with US companies and sharing technology, which is presently allowing nations like China to steal private company technology priotected by patents and other laws.. When the timeframe for disclosurecomes closer, it is expected that those presently using such shell companies in different states with laws that allow this to occur will likely seek to find foreign nations to secrete their assets and launder funds. However, any corporations or companies registered in any state doing business here will have to reveal the beneficial owners even if they are created under the laws of other nations such as the British Islands. This means that this imbeded fraud that is costing our nations billions in stolen assets and tax evasion will diminish. It will likely never go away.
Jeffrey Newman is a whistleblower lawyer with the firm Jeff Newman Law who handles various kinds of whistleblower cases throughout the U.S. including Securities & Exchange whistleblower cases and False Claims Act Qui Tam whistleblower cases. He can be reached at Jnewman@newman&shapiro or at 978-880-4758