Helping business clients as beneficial ownership reporting deadline looms

By Evan Sparks

As the end of 2024 looms, approximately 33 million businesses are facing a new and unfamiliar deadline: filing their beneficial ownership information, or BOI, with the Financial Crimes Enforcement Network.

Since the average business has had no interaction with FinCEN, this will come as a surprise to many — even though it’s been long discussed by bankers. This new information collection was created by the Corporate Transparency Act, passed by Congress in 2021. To support banks’ customer due diligence evaluation that is required under the Bank Secrecy Act, businesses must identify the “beneficial owners” of the company. The idea is to minimize the use of shell companies to launder funds.

Deadlines and details

Businesses formed before Jan. 1, 2024, have until Jan. 1, 2025 to report their BOI to FinCEN. Companies created or registered during 2024 have 90 days to file, and starting in 2025, businesses will have 30 days to file their BOI. Corrections and update to BOI are also due within 30 days.

The requirements do not apply to publicly traded companies (for obvious reasons), nonprofit organizations and certain large operating companies, which are among 23 categories of exempt entities. FinCEN has released a small entity compliance guide to educate potential filers.

A few wrinkles

In March, a federal court in Alabama held that the Corporate Transparency Act — and thus the BOI registry it created — is unconstitutional, and issued an injunction preventing FinCEN from collecting BOI information from members of the National Small Business Association, which brought the suit. NSBA non-members are still subject to the rule. FinCEN has appealed the ruling and the appeal was pending at press time.

While expressing support for the goals of the data collection, ABA argued that FinCEN has significantly undercounted the time and effort banks put into complying with these requirements.

Earlier this year, FinCEN moved to renew its rule spelling out the policies and procedures banks need to have to review and analyze BOI information from their customers. While expressing support for the goals of the data collection, ABA argued that FinCEN has significantly undercounted the time and effort banks put into complying with these requirements. Given the new registry, ABA argued that “those aspects of the CDD rule that require banks to collect similar duplicative information should be reassessed.”

Getting the word out

While banks’ AML/BSA processes are theoretically going to benefit from the new BOI registry, banks have a unique opportunity to help educate their business clients about what is likely to be an unfamiliar requirement and process.

FinCEN has released video and radio commercials as part of the government’s broader public outreach campaign. (As public documents, these resources are available to banks for consumer education.) FinCEN also issued a notice to financial institution customers about BOI reporting, explaining why certain customers must report directly to the agency in addition to giving information to their banks, which are subject to the customer due diligence rule. ABA has urged FinCEN to provide more resources and support to get the word out about the new requirement.