Financial Institutions and the Beneficial Ownership Information Reporting Requirement

Effective January 1, 2024, business entities defined by the Financial Crimes Enforcement Network (FinCEN) as "reporting companies" are required to file an electronic report disclosing information about their beneficial owners. The beneficial ownership information (BOI) reporting rule, finalized by FinCEN under the 2021 Corporate Transparency Act, touches millions of businesses, both domestic and foreign. Does the rule also require changes at financial institutions? The answer is no, but there are still important things to consider.

As you may know, financial institutions have been required to collect BOI to comply with the Bank Secrecy Act and anti-money laundering for quite some time. It's important for financial institutions to understand recent changes in BOI requirements so they can advise non-consumer customers as well as complete periodic risk reviews. The reporting companies for which financial institutions provide products and services include corporations, limited liability companies, and any entity that's legally registered to do business in the United States.

Below are some high-level questions financial institutions may have about the BOI requirement.

1. Who is considered a beneficial owner?
   These are individuals who either exercise substantial control over the reporting company or owns or controls at least 25 percent of the entity.
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3. How should entities report their BOI?
   FinCEN has an electronic portal for reporting companies to register their beneficial owners.
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5. Are financial institutions required to make sure reporting companies comply?
   While it's important to make sure non-consumer customers are informed about the requirement, financial institutions are not required to ensure their associated reporting companies are compliant. FinCEN has been communicating regularly to non-consumer entities through various outreach activities, multimedia content, the Small Entity Compliance Guide, government offices at the federal and state levels, small business and trade associations, and interest groups.
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7. When must reporting companies file their BOI?
   • Non-consumer entities operating before January 1, 2024, must report their BOI no later than January 1, 2025.
   • Non-consumer entities that began operations after January 1, 2024, but before January 1, 2025, have 90 days from the date of their legal formation to report.
   • Non-consumer entities that begin operations after January 1, 2025, will have 30 days from the date of their legal formation to report.
   • Note that willful failure to file a BOI report could result in fines up to $591 per day (up to $10,000) and two years in prison.
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9. Will financial institutions have access to BOI?
   Yes, eventually. In April, FinCEN announced that financial institutions and their supervisors will have access starting in spring 2025.

For more information, including reporting exemptions and an array of compliance resources, visit the FinCEN website.