In today’s highly regulated financial and business environment, compliance with laws designed to prevent fraud, money laundering, and tax evasion is essential. Two critical elements of this framework are the Financial Crimes Enforcement Network (FinCEN) and Beneficial Ownership Information (BOI) compliance, both of which aim to promote transparency and accountability in financial and corporate transactions.
Insight into what registration and compliance deadlines mean for your business, including critical dates, required documentation, grace periods, and consequences of noncompliance, is essential to avoid penalties and reputational harm.
Understanding FinCEN and BOI Registration
While FinCEN compliance focuses on monitoring financial transactions, BOI compliance addresses the ownership structures behind those transactions. Consider a scenario involving a real estate company that frequently handles large cash transactions. Under FinCen regulations, the bank facilitating these transactions must report suspicious deposits. Simultaneously, the company itself must comply with BOI rules by disclosing owner information to ensure its activities are not linked to smurfing.
What Is FinCen?
FinCEN is a bureau of the United States Department of the Treasury. Its mission is to safeguard the financial system from illicit activity, such as money laundering and other financial crimes. FinCEN enforces compliance with the Bank Secrecy Act (BSA), which requires financial institutions to maintain robust anti-money laundering (AML) programs and report suspicious activities.
Banks and other financial institutions must also complete Customer Due Diligence (CDD) by verifying their customers’ identities and understanding the nature of their transactions.
What Is the BOI?
BOI compliance is governed by the FinCEN Corporate Transparency Act (CTA), which aims to enhance transparency in business ownership structures. Under this act, companies must disclose information about their beneficial owners — individuals with at least 25% of the company’s equity or significant control over its operations. This disclosure is filed with FinCEN.
BOI compliance helps authorities combat tax evasion, money laundering, and the misuse of shell companies. For example, in 2016, the Panama Papers revealed how anonymous shell companies were used to hide billions of dollars, prompting global regulatory reforms like the CTA.
Key Deadlines
FinCEN enforces registration and reporting obligations under the BSA and the CTA. Deadlines businesses need to be aware of, including when their BOI report is due, are:
- Filing Suspicious Activity Reports (SARs): Financial institutions must submit SARs to FinCEN within 30 calendar days of detecting suspicious activity. This limited grace period enables proactive investigation.
- Currency Transaction Reports (CTRs): Institutions must report cash transactions exceeding $10,000 to FinCEN within 15 days.
- Initial BOI filing: Most companies, limited liability organizations, and similar entities must report their BOI within 30 days of formation or registration. Organizations registered in 2024 have 90 calendar days to file initial reports.
- Existing entities: Businesses formed or registered before January 1, 2024, must file their initial BOI report by January 1, 2025.
There are no grace periods for SARs and CTRs, as these filings are time-sensitive and crucial for preventing financial crime.
Consequences of Missing Deadlines
Willful failure to comply with FinCEN deadlines can result in noncompliance penalties ranging from $500 per day for BOI violations to hundreds of thousands of dollars for more severe breaches, such as failing to file SARs. Willful violations may lead to criminal prosecution, including imprisonment. Repeated violations can lead to regulatory scrutiny and loss of business licenses.
Noncompliance with FinCEN regulations can also result in severe penalties, including hefty fines and reputational damage. For instance, in 2020, a global bank paid $150 million in penalties for failing to detect and report suspicious activities related to money laundering.
How to File a BOI for an LLC
Federal reporting requirements for an LLC ensure compliance with CTA filing, which aims to prevent financial crimes by promoting transparency in business ownership. Follow these steps to file a BOI.
1. Determine Whether Your LLC Must File
Who must file a beneficial ownership report? Most LLCs formed or registered in the U.S. are required to file BOI unless they fall under an exemption. Some of the 23 exempt company types that form part of these CTA exemptions include nonprofits, accounting firms, inactive entities, and public utilities. If your LLC has no beneficial owners, you may still need to report this status to FinCEN.
2. Gather the Required Information
To meet FinCEN’s requirements, your business must provide:
- BOI: Names, birth dates, government-issued identification numbers, and residential addresses for individuals owning a substantial amount of the company or exercising notable control within the organization.
- Transaction records: Detailed documentation of financial transactions that trigger SAR or CTR filings.
- Company information: Legal name of the LLC, its current access, state of registration or formation and the business’s Taxpayer Identification Number (TIN).
3. Access the FinCEN Reporting Portal
FinCEN will provide a secure online portal for submitting BOI reports. Once logged in, enter all information about your LLC and its beneficial owners. Double-check for accuracy to avoid delays or potential penalties.
4. Retain Records of Your Submission
After filing, keep a copy of the confirmation and all supporting documents for your records. You may need this information for future updates or audits.
Ongoing Compliance and Best Practices
BOI reporting is an ongoing task, and your LLC must update its filings within 30 days of any significant changes, such as:
- Beneficial owner filing, which includes adding or removing an owner
- Changes to a beneficial owner’s information
- Changes in the LLC’s address or legal name
Streamline compliance by leveraging technology and using compliance software to automate tracking and reporting obligations. It is also a good idea to gather the required information early on, especially for LLCs with complex ownership structures. Finally, consult legal or compliance experts to ensure accuracy and timeliness in your findings and professional tax planning.
Trust Crow Estate Planning & Probate With Your Business Planning
Filing a BOI report for your LLC is straightforward but crucial to ensuring compliance with FinCEN regulations. By understanding your obligations, gathering the necessary information, and meeting deadlines, your business can avoid penalties and contribute to a more transparent corporate environment. For added peace of mind, seek professional guidance to ensure your LLC meets all FinCEN/BOI requirements on time.
Crow Estate Planning & Probate focuses on estate and business planning by creating turnkey plans that suit your unique needs. Our firm is BBB Accredited, a Super Lawyers’ Rising Star in the Mid-South from 2018-2023, a Member of the National Association of Estate Planners & Councils, and a member of the Chambers of Commerce for Clarksville, Nashville, Hopkinsville and Springfield. John Crow himself was also named Super Lawyer for 2024. We help you protect your personal assets as you form your company.
Schedule your free consultation and stay compliant.
