#boireporting

BOI update: 6.5 million of 32 million reports filed so far

This new year witnessed the Financial Crimes Enforcement Network (FinCEN) implementing the Corporate Transparency Act’s (CTA) Beneficial Ownership Information (BOI) reporting provisions. These provisions require reporting on information about beneficial owners of the business by most US business entities. These provisions are aimed at fortifying the US financial system’s integrity, making it tougher for unlawful players to create and use shell companies for money laundering or the secreting of assets. Here we explore the key aspects of the BOI reporting provisions on businesses in the US.

Significance of reporting beneficial ownership information (BOI)

Let’s understand the various aspects of BOI and its significance for business entities

Understanding BOI

BOI pertains to the specifics of individual owners of a company. These owners could have direct or indirect control over the company. Knowing all the true company owners is important to understand the kind of individuals you are doing business with. This knowledge instills confidence and helps keep business decision-making within tolerable risk levels. BOI ensures trust is established with legitimate business entities and provides a better understanding of risk exposure. For instance, you could be doing business with an entity owned by a sanctioned individual or a politically exposed person which could be risky for your business. Such knowledge would ensure you have the option to end such a perilous business relationship.

Importance of BOI

· Before the implementation of BOI regulations, offenders could conceal themselves behind the veil of secrecy created by opaque ownership structures. When BOI reporting becomes mandatory, such offenders will find it harder to hide. For instance, shell companies are often used to hide illegal activities and launder money. Without BOI, identifying shell companies would be time-consuming and difficult.

· Financial institutions also require BOI for due diligence reporting. BOI reporting reveals conflict of interest issues with a company.

· BOI is also important for the government when approving loans, issuing export licenses, or issuing government contracts.

· Businesses across industries also use this information for third-party risk management, to measure their risk exposure and take mitigative steps.

· BOI is also essential for combating financial crime and ensuring compliance with laws on money laundering, sanctions, fraud, financing of terrorist activities, etc. BOI reporting makes it harder for lawbreakers to hide their interests in specific businesses.

· BOI Reporting promotes transparency, ensuring businesses function ethically and legally.

BOI Filing requirements and penalties

BOI information has to be filed by two kinds of companies as per the rules laid down by FinCEN. 

· Domestic companies including corporations, limited liability companies, and other business entities, formed by filing a document with the government.

· Foreign companies including corporations and limited liability companies incorporated under the laws of a foreign company, but registered to do business in the US by filing a document with the government.

Failing to report BOI or reporting wrong information will be severely penalized. Willful violations can attract penalties as high as $500 per day of continued violation, while criminal violations can result in imprisonment for up to two years and a fine of $10,000.

Provisions have been made for mistakes or omissions rectifications within 90 days of the original report deadline. Ignoring BOI reporting responsibilities can attract civil and criminal penalties against firms.

Certain companies, such as nonprofit organizations and companies meeting certain specific requirements, are exempt from BOI reporting. However, for the rest of the companies operating in the US, this reporting obligation is mandatory and has far-reaching business implications.

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