Beneficial ownership information reporting is a requirement under federal law, and it also assists law enforcement in combatting financial crime, money laundering, and terrorism, which protects the financial system all businesses in the United States rely upon. At its core, beneficial ownership information reporting requires each reporting company to provide the identity of its beneficial owners (holders of 25% or more of the ownership or with substantial control of a reporting business).

This article will serve as a guide, steering you through the necessary steps to successfully file a Beneficial Ownership Information Report under the Corporate Transparency Act. Although precise instructions and clear explanations are not possible at the time of this writing because the filing portal for beneficial ownership information reporting does not open until January 1, 2024, this article should assist you in preparing to fulfill your legal obligations with respect to beneficial ownership reporting requirements.

About Beneficial Ownership Information Reporting Generally

What are the Corporate Transparency Act and Bank Secrecy Act?

The Corporate Transparency Act

The Corporate Transparency Act was enacted with the sole purpose of mitigating illicit activities by increasing transparency in the ownership structures of companies incorporated in the United States. One of the significant features of this Act is the requirement for these companies to file a Beneficial Ownership Information Report.

The Bank Secrecy Act

The Bank Secrecy Act is a federal law enacted to assist in the detection and prevention of money laundering. Essentially, it requires financial institutions to maintain detailed records of cash purchases, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity indicative of money laundering, tax evasion, or other criminal activities.

How Do the Corporate Transparency Act and the Bank Secrecy Act Work Together?

The Corporate Transparency Act and the Bank Secrecy Act harmonize to curb underhanded dealings by enhancing transparency and accountability in financial transactions. The Corporate Transparency Act requires companies to disclose their beneficial ownership information, thereby discouraging illicit activities by making it difficult for individuals to use corporate entities to hide assets or illicit gains. On the other hand, the Bank Secrecy Act obligates financial institutions to keep detailed records of cash transactions and report suspicious activities. By having these two Acts in sync, the veil of anonymity behind which nefarious activities can thrive is lifted, thus fostering a more transparent, accountable, and trustworthy business environment.

What is the Financial Crimes Enforcement Network?

The Financial Crimes Enforcement Network (FinCEN) is a bureau within the United States Department of the Treasury to support law enforcement agencies via its financial intelligence units to support financial criminal investigations. Established to safeguard the financial systems from illicit use, combat money laundering, and promote national security, FinCEN collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes. This bureau is pivotal in the enforcement of the Corporate Transparency Act and the Bank Secrecy Act, as it hosts the reporting systems used for beneficial ownership information reporting and monitors compliance with these regulations.

When Should a Reporting Company Complete its Initial Beneficial Ownership Report?

Under the Corporate Transparency Act, there are specific timelines to file the initial Beneficial Ownership Report. Not adhering to these timelines may lead to penalties and non-compliance issues including civil penalties of up to $500 per day of non-compliance and criminal penalties of $10,000 and/or two years’ imprisonment.

When a reporting company should complete its initial beneficial ownership information report depends upon when the reporting company was formed.

Initial Beneficial Ownership Information Report for Reporting Companies Created Before January 1, 2024

Companies that were formed before January 1, 2024, are required to file their initial beneficial ownership information report with FinCEN on or before December 31, 2024. The initial report should include information about each beneficial owner of the reporting company but need not include information about the company applicant of the reporting company.

Initial Beneficial Ownership Information Report for Reporting Companies Created Between January 1, 2024, and December 31, 2024

Companies that are formed between January 1, 2024, and December 31, 2024, are required to file their initial beneficial ownership information report with FinCEN within ninety (90) days of formation. The initial report should include information about each beneficial owner of the reporting company including the company applicant of the reporting company.

Initial Beneficial Ownership Information Report for Reporting Companies Created on or After January 1, 2025

Companies that are formed on or after January 1, 2025, are required to file their initial beneficial ownership information report with FinCEN within thirty (30) days of formation. The initial report should include information about each beneficial owner of the reporting company including the company applicant of the reporting company.

When Should a Reporting Company Update Beneficial Ownership Information Reports After Initial Report?

After the initial beneficial ownership information report is submitted, reporting companies are required to file updated reports with FinCEN. Reporting companies need not file annual reports when there is no change in beneficial owners and no change in beneficial owner information, but a reporting company must update beneficial ownership information within thirty (30) days of any change of beneficial owners or beneficial ownership information. Read about how to fix inaccuracies or make changes to a beneficial ownership information report by following this link.

How Does a Reporting Company File a Beneficial Ownership Information Report?

A reporting company not subject to an exemption is required to file a beneficial ownership information report containing specific information about the reporting company, its beneficial owners, and the company applicant electronically commencing on January 1, 2024.

At the time of this writing, the FinCEN filing system is still under development and will not be available until January 1, 2024. FinCEN will not accept beneficial ownership information reports before January 1, 2024.

FinCEN will publish instructions and other technical guidance on how to complete the Beneficial Ownership Information Report once the FinCEN filing system is completed and open for filings.

There may be certain circumstances in which a reporting company is unable to electronically file a beneficial ownership information report through the FinCEN secure filing system, and in such cases, the reporting company should contact FinCEN for assistance.

Ensure Compliance with Beneficial Ownership Information Reporting Regulations

Ensure your business is compliant with beneficial ownership information reporting requirements. The experienced attorneys at San Diego Corporate Law are equipped with the technical knowledge and practical expertise you need. Let us complete your filing requirements to ensure you meet your reporting obligations and your reports are timely filed and accurate. Do not leave such a crucial aspect of your business with significant civil and criminal penalties to chance. Contact us today for comprehensive assistance with beneficial ownership information reporting.