Rule for Beneficial Ownership Reporting (2022)

https://www.fincen.gov/news/news-releases/fincen-issues-final-rule-beneficial-ownership-reporting-support-law-enforcement

by vyrotek • 3 years ago

74 47 3 years ago

fincen.gov

charcircuit• 3 years ago

September 29, 2022

dang• 3 years ago

Year added above. Thanks!

vyrotek• 3 years ago

"The rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States to report information about their beneficial owners—the persons who ultimately own or control the company, to FinCEN."

I shared this because a CPA recently told me that very few people seem to know that this change is coming. It was the first I had heard of it and obviously doesn't impact most people. But it seemed like a big deal since it goes after those using anonymous shell companies to hide things.

phoxtricks2• 3 years ago

I am working on this and the tricky part is that you will need to file amendments within 30 days whenever there is a change in the details you filed. So changes in corporate structure, someone moves, ID card expires, you have to file an amendment.

jccooper• 3 years ago

I've never heard about it, and will probably forget in three months. So will a million other people.

tennisflyi• 3 years ago

What is "most" in regards to?

ddmitriev3• 3 years ago

[1] lists exceptions in section 8. Mostly, they are entities that are already subject to substantially more stringent reporting requirements such as banks, entities registered with the SEC, and so on:

Many of these exempt entities are already regulated by federal and/or state government, and many already disclose their beneficial ownership information to a governmental authority.

The one exemption that I found unexpected was the following:

(xxi) Large operating companies with more than 20 full-time employees, more than $5,000,000 in gross receipts or sales, and an operating presence at a physical office within the United States.

It's not clear to me why such entities need to be excluded from reporting. It's true that they are much less likely to be shell companies, but still...why? Also, get below $5M one year or let go of your 21st employee, and get ready for the left-field fine from FinCEN.

[1] https://www.fincen.gov/sites/default/files/shared/BOI_FAQs_F...

throw__away7391• 3 years ago

It's true that they are much less likely to be shell companies

I think this seems to be the clear answer though. Such a business is not trivially filed into existence.

LegionMammal978• 3 years ago

The exemption for "large operating companies" was adapted straight from the text of the 2019 Corporate Transparency Act [0] (at inserted subsection 5336(a)(11)(B)(xxi)) that this regulation is implementing; it's pretty much set in stone from FinCEN's perspective. The closest I could find to an initial rationale was in the statement given by Ron Wyden when he introduced a 2017 version of the bill to the Senate [1]:

The bill is constructed to exempt many legitimate businesses, and the information requested is already provided by most companies in the normal course of business. Collecting beneficial ownership information at the time of incorporation relieves later compliance burdens for legitimate businesses, while at the same time prevents illegitimate businesses from operating in secrecy.

That is, the regulation should impact as few businesses as possible while still achieving its goals, so any company that fits into the mold of almost-certainly-not-a-secret-shell-company should be exempted if possible.

Regarding the "left-field fine", that's presumably why businesses have a 30-calendar-day period to report that they are no longer exempt. But obviously, that isn't going to help if the business is unaware of the reporting requirement. Perhaps the requirement on new businesses is expected to spread awareness before the requirement on existing businesses comes into effect.

[0] https://www.govinfo.gov/content/pkg/PLAW-116publ283/pdf/PLAW... (big PDF warning)

[1] https://www.congress.gov/115/crec/2017/08/02/CREC-2017-08-02...

ddmitriev3• 3 years ago

I am reminded of "accidental Americans" who discovered they owe FinCEN hundreds of thousands of dollars in penalties for not reporting their foreign (i.e., local to them) bank accounts. Now, it's the forgotten-but-not-dissolved LLCs' turn to shine.

Failure to meet the reporting requirements or unauthorized disclosure of BOI can result in civil or criminal actions. Willful failure to file a complete initial or updated report with FinCEN is subject to a US$500-per-day fine (up to US$10,000) and imprisonment for up to two years.

refurb• 3 years ago

The FinCEN database is a massive heap of garbage. Anyone who has ever tried to submit knows this. The form is confusing as hell, so I assume everyone fills it out slightly differently. The website seems to crash with alarming regularity. I had to fill out the form 3 different times because of this.

So basically they have a massive database of horribly inaccurate data. From what I gather, the only people who would get in trouble for not submitting are the ones already on the IRS radar. The FinCEN database is used more to add on top of an investigation than initiate one.

I'd love to see someone prosecuted for failure to report as a single violation (i.e. no other tax or financial crimes involved). I assume the lawyers for the defense would have a field day sowing doubt in the judges mind as to whether or not someone truly failed to report (e.g. missing or corrupted data, IT errors, etc).

carbonguy• 3 years ago

Looking over the "fact sheet" linked in the announcement[1], this appears to be the key requirement:

When filing [Beneficial Ownership Information] reports with FinCEN, the rule requires a reporting company to identify itself and report four pieces of information about each of its beneficial owners: name, birthdate, address, and a unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of such document).

While I could wish this information would be public in the same way as eg. SEC form 4 filings, this rule really does feel (to me, a rank layman) like a big step forward for corporate transparency... to government, at least. Still pretty exciting!

Any corporate legal eagles out there who have an actual informed perspective to share on this new rule and its possible effects?

[1] https://www.fincen.gov/beneficial-ownership-information-repo...

nullc2• 3 years ago

While I could wish this information would be public

oh absolutely, that would very useful for when you want to find where varrious people that you'd like to murder live when they unhelpfully owned their home via an entity to keep their address private.

As it is you'll just have to wait for fincen to leak or sell the data, since thankfully congress provided for no meaningful consequences for this datas disclosure or misuse.

peyton2• 3 years ago

Looking fwd to paying my lawyers a bit more. The bad guys will keep operating under one of many exemptions and workarounds.

jprete• 3 years ago

Not that I'm a lawyer, but this rule strikes me has having a lot of potential. If a company declares false beneficiaries, it may be hard to find the true beneficiary, but I would think it's a lot easier to find and prosecute everyone involved in the false declaration.

neonate• 3 years ago

"The rule is effective January 1, 2024."

yieldcrv2• 3 years ago

And January 1, 2025 for entities created before January 1, 2024

plenty of time to repeal or debilitate this in the annual NDAA

qwerty4561273• 3 years ago

What drives me mad is many countries publishing this data openly online. I'm Ok with relevant government agencies knowing a business is mine but I really don't want every random weirdo on the Internet to know this, let alone my birth date, home address and which other businesses I do. There should be a legal and practical way for business owners to protect their personal privacy. Especially nowadays when they are so many parties collecting all the personal data they can reach and so many industrial-scale 24x7 scam/fraud farms all over the world.

somsak2• 3 years ago

what concretely are you concerned about if a "random weirdo" knows your address?

gwillen• 3 years ago

Robbery/burglary? SWATing? The possibilities are delightful and endless. The former is a major concern for people who are known to be rich; the latter for people who are infamous online (and has the [dis]advantage that it can be carried out by anybody, anywhere in the world, typically repeatedly, and with usually zero repercussions.)

glasss• 3 years ago

Being concerned about a credible threat isn't relevant when it comes to privacy. Everyone has a right to a certain amount of privacy.

I actually think the ownership reporting is a good idea, but I feel the privacy concerns are the only valid criticism of it.

stevesimmons• 3 years ago

In the European Union, all countries set up public UBO registries. A few were challenged on privacy grounds, and in November last year the Netherlands and Belgium and probably a few others closed off public access.

Now only government departments and banks are able to access those registries. That's very inconvenient, for instance, for non-bank lenders, who still have a regulatory obligation to ascertain the UBOs of who they lend to.

ensignavenger2• 3 years ago

This is such a massive invasion of privacy. The government is completely (and perhaps willingly) incompetent to keep this information confidential.

worik• 3 years ago

The government is completely (and perhaps willingly) incompetent to keep this information confidential.

Yes

It should be public

jmvoodoo• 3 years ago

There are very valid reasons to use an LLC to keep your identity private. Many business owners use anonymous LLCs to avoid harassment, or from members of their community learning what they do, or how well off they might be. There's nothing wrong with that, and doing away with it would harm a lot of innocent people.

Pxtl• 3 years ago

I'd say name and a surrogate ID key so you can see which individuals own multiple related businesses that create a conflict of interest and who youd want to avoid working with.

Not driver's license and address. That should be private.

nullc2• 3 years ago

Shortly after this passed it turned out that propublica ended up in the possession of what appears to be the detailed tax records of every American. And this happened even though there are substantial criminal consequences attached to the disclosure of misuse of tax records.

In the case of this Beneficial Ownership information there are no such assurances, even though the much stronger ones for tax records turned out to be woefully inadequate.

patmorgan23• 3 years ago

The corporate form is a privilege, not a right. Capital does not have the right to remain anonymous.

ensignavenger2• 3 years ago

People should have the right to go about their business without having it tracked in a government database. It is no different than any other aspect of personal privacy as enshrined in the 4th Amendment. Deputizing corporations, banks, and other private entities to collect this data on behalf of the government does not make it any less a violation of 4th Amendment rights.

yieldcrv2• 3 years ago

where do you actually file this in 2024?

phoxtricks2• 3 years ago

Fincen is building a filing platform named BOSS. But it's not ready.

sholladay2• 3 years ago

This sounds like a good step forward for society. However, it’s going to create problems of its own, albeit lesser ones than those it is solving.

When I started my first company, I made the mistake of putting my real address on all government forms and was immediately inundated with junk mail in volumes I had never seen before. I had no choice but to stop all mail at that address. Ever since then, I’ve used mail forwarding services and filed in Delaware. It provides legitimate protection from a broken mail system.

FinCEN claims they are going to put controls in place around how the personal information database can be accessed and used but come on, does anyone actually think that’s going to be effective?

I would be excited for this change if it came with meaningful penalties for abuse of my personal information, including junk mail. But then I suppose the post office would start hemorrhaging even more money and advertisers would rally around fighting it.

vlovich123• 3 years ago

Curious, what’s the mail forwarding service you used and how did that stop the junk mail if it presumably got redirected back to you anyway?

sholladay2• 3 years ago

Harvard Business Services has a mail forwarding service that includes junk mail filtering and it works. They even scan the mail and send it via email which means you have access to legitimate mail wherever you are. You can then request the original hard copy to be forwarded if needed.

Even if none of the above were true and they blindly forwarded all mail, it would still be helpful because at any time you could stop the mail forwarding without stopping all mail at your real address. So for example, if you got overwhelmed with junk mail from your forwarded address, you could just stop the mail forwarding service and your family would still be able to send you mail directly. It’s similar to Apple’s Hide My Email but for snail mail. When you want to disassociate from an address, you just delete it.

Now, of course, as with most things in life, this can be used for good or for evil. Anonymity both causes and solves problems. The question is, is it a human right? I believe it should be, but maybe not if you hold certain positions of power. Defining that is tricky, though.

I think most people would trade in their anonymity for fortune or fame, at least until they had experienced it, but not everyone would.

olalonde• 3 years ago

albeit lesser ones than those it is solving

Very doubtful. Small inconvenience for the oligarchs (is it a crime to be an oligarch by the way?) and drug traffickers, lot of inconvenience for a lot of innocent people. In my opinion, the war on financial privacy has been a net negative for society. A massive cost with little reward. Global AML compliance cost alone is estimated at ~300$ billion/year and that doesn't account for the invisible cost (e.g. billions of unbanked and underbanked people). How much crime does it really stop?

[0] https://www.forbes.com/advisor/banking/costs-of-being-unbank...

Rule for Beneficial Ownership Reporting (2022)

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