Beneficial Ownership Information Reporting Deadline Extension for Reporting Companies Created or Registered in 2024
- Source: federalreserve.gov
Takeaway:
The Financial Crime Enforcement Network’s (FinCEN) Beneficial Ownership Information (BOI) Reporting Rule, requiring certain U.S. companies to report information to FinCEN about their beneficial owners (i.e., the individuals who ultimately own or control the company) goes into effect on January 1, 2024. The rule requires (i) existing companies (i.e., companies created or registered before 2024) to file their initial BOI reports by January 1, 2025 and (ii) companies which are created or registered on or after January 1, 2024, to file their initial BOI reports with FinCEN within 30 days of their creation or registration. In response to concerns raised over the brevity of the 30-day filing timeline, FinCEN is proposing to amend the BOI Reporting Rule for those companies created or registered in 2024, allowing them 90 days to file their reports.
Treliant’s experts understand the complexities of the BOI Reporting Rule and can assist institutions and companies of all kinds in their efforts to maintain compliance with this and all reporting requirements.
Highlights:
As the effective date of the BOI Reporting Rule approaches, discussions continue between FinCEN, legislative bodies, and the private sector regarding their myriad concerns. One such result of the negotiations is FinCEN’s proposal to extend the reporting requirement for businesses created or registered during the 2024 calendar year from 30 days to 90 days.
There are numerous rationales to justify FinCEN’s proposal. Per FinCEN Director Andrea Gacki, “We anticipate that the proposed extension of the BOI reporting deadline for the first year of implementation will increase compliance, reduce burden on reporting companies, and promote the creation of a highly useful database.”
One way in which this extension is intended to meet those desired results is that it would give businesses more time to understand the new regulatory obligations and how they apply. To aid in this understanding, FinCEN has released educational materials on BOI reporting requirements, such as the Small Entity Compliance Guide. Businesses may still choose to seek further guidance from legal and/or compliance professionals, though the currently prescribed 30-day period might make such counseling difficult to obtain.
Additionally, this extension would allow these newly formed companies more time to gather necessary information for their initial BOI reports and resolve any report filing issues. It would also allow FinCEN to address questions and issues arising during the BOI Reporting Rule’s implementation.
As part of the proposal, FinCEN assessed the impact of the extension, indicating that it would not impose new business costs. FinCEN added that it is seeking comment on the assessment and any potential repercussions. Written comments on the BOI Reporting Rule must be submitted on or before October 30, 2023.
Implications:
For financial institutions, the BOI reporting requirement places an imperative on bolstering compliance infrastructures and processes. The increased responsibility around verifying, storing, and managing customer information calls for investments in training, technology, and potentially external expertise to ensure adherence to the new regulatory standards. Also, as intermediaries in many transactions, financial institutions will face heightened scrutiny and the challenge of managing third party relationships with entities grappling with their own compliance issues. The rule’s emphasis on transparency ultimately seeks to curtail illicit financial activities, but its implementation may place a considerable operational burden on financial institutions in the short to medium term.
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