Filing with FinCEN

Accountants and CPAs in Pennsylvania should be aware of the pending requirements for their small business clients regarding reporting of beneficial owners to the U.S. Treasury. 

The Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Treasury whose mission is to “safeguard the financial system from illicit activity, counter money laundering and the financing of terrorism, and promote national security through strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.” In response to the Corporate Transparency Act (CTA) of 2019, FinCEN has developed the Beneficial Ownership Information (BOI) form. 

Part of the Anti-Money Laundering Law, the CTA

“requires certain new and existing small corporations and limited liability companies to disclose information about their beneficial owners. A beneficial owner is an individual who (1) exercises substantial control over a corporation or limited liability company, (2) owns 25% or more of the interest in a corporation or limited liability company, or (3) receives substantial economic benefits from the assets of a corporation or limited liability company.” 

Mandatory compliance with this law has been halted due to ongoing litigation; therefore, at this writing, the filing of the BOI form is voluntary. As your clients’ financial expert, you should be prepared to submit this information as soon as required. You may wish to consult and advise your client to submit it voluntarily so that they avoid any penalties if deadlines are missed when submission becomes mandatory. 

Per the FinCEN website:

Companies required to report are called reporting companies. There are two types of reporting companies:

• Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.

• Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office. 

There are 23 types of entities that are exempt from the reporting requirements, mostly financial entities, non-profits, and large operating companies. The BOI Small Compliance Guide includes a checklist that will help you determine if your client or even your own firm is exempt.

A third-party representative may complete the BOI with the approval of the owner(s). Filing is easy: simply go to fincen.gov/boi and follow the instructions. You will need to enter identifying information about the owners or controllers of the company as defined above, as well as the “company applicant” – this is the person who filed the company formation information with the Secretary of State. However, only companies that are formed in 2024 or later will need to complete this section. When completing the form, you will submit your personal contact information. After submitting, be sure to download and file the confirmation information. 

You may choose to create a FinCEN ID for yourself or your client. Though not required, it simplifies future reporting by allowing you to simply enter the ID number rather than completing all the identifying information each time you update the BOI for changes in ownership, control, business structure, or personal details.

As with just about everything else, beware of scammers! Bad actors are already masquerading as FinCEN officials and sending fraudulent communications to companies and accountants. Be sure to warn your clients against phishing scams, giving your clients a checklist of red flags to help them avoid becoming victims.

Reach out to your business clients about the pending BOI requirement so that they know you are taking proactive steps to keep them in compliance with the law and to protect them from financial penalties or fraud.