Global elites have long employed shell companies to evade taxes and conceal assets. However, in recent years, anonymous corporations have become conduits for a broad spectrum of financial crimes, including money laundering, drug trafficking, terrorist financing, circumventing economic sanctions, engaging in corruption, and participating in various unlawful activities.

Responding to the growing menace of financial crime and with a focus on safeguarding national security and prosperity, an increasing number of nations are stipulating that legal entities divulge accurate and complete details about their beneficial owners. These owners are the individuals who ultimately own or exercise control over a legal entity or arrangement, including those involved in its creation or registration.

While the US government has intensified its enforcement efforts concerning the reporting of Foreign Bank and Financial Accounts (FBAR), the beneficial ownership information (BOI) reporting took effect on January 1, 2024, even though the U.S. Department of the Treasury's Financial Crimes Enforcement Network’s (FinCEN) final BOI reporting rule was issued in late 2022. This reporting requirement makes it imperative for most companies and their treasury teams to initiate their BOI compliance measures immediately, particularly when the primary onus for reporting BOI will rest with legal and treasury departments.

Substantiating this assertion is Strategic Treasurer’s white paper BOI: What Treasurers Need to Know Now, which states that “While the responsibilities for the Report of Foreign Bank and Financial Accounts (FBAR) filing are usually centered on treasury and tax departments, we believe that most of the beneficial ownership information (BOI) responsibilities will fall on legal and treasury departments. The intersection of bank relationships, accounts, and beneficial ownership fall under BOI and FBAR regulations, and treasury almost always has a major stake in these areas and must either provide leadership or support to ensure the company is compliant.” * 

The white paper further articulates that the primary purpose of the law is to set up a reporting system that mandates companies to disclose their actual or true owners, even if the company formation documents designate a different owner. In fact  FinCEN’s “Final Rule” now requires reporting companies, which include both domestic and foreign companies registered to do business in the US, to file reports that (1) identify themselves; and (2) provide information on their beneficial owners and (for new companies) company applicants.

In this regard, the white paper by Strategic Treasurer brings to light the definition and components of three key areas in BOI filing: beneficial owner, substantial control, and company applicant.

The white paper also offers information about the types of companies obligated to report BOI, those exempt from reporting BOI, the distinction between BOI reporting and FBAR, and the time frame for BOI reporting regulations, covering initial, updated and corrected reports. Additionally, the white paper highlights the essential information to be reported about reporting companies, beneficial owners and company applicants, along with the estimated time burden of filing initial and updated BOI reports.      

Filing for beneficial ownership information may be a complex and time-consuming undertaking. This is because those responsible for filing BOI reports on behalf of the reporting company must be accurate, efficient, compliant, and oriented towards risk mitigation.

Bearing this in mind, the white paper recommends seeking external assistance from a third party, particularly from an entity with expertise in managing the nuances of FBAR filing. “External professional services that have experience in similar areas such as FBAR filing can assist legal entities in understanding the key components of the new BOI reporting regulation and effectively handle the entire BOI filing process. Relying on these third parties can save companies valuable time and minimize the burden on internal teams.”

In conclusion, FinCEN estimates that BOI filings in the first year will surpass 30 million entities. From the second year onward, they expect an annual volume of approximately 5 million company filings, encompassing initial, updated, and corrected reports.

Millions of organizations and those tasked with overseeing different legal entities will need to submit BOI reports to FinCEN. Considering that the intersection of bank relationships, accounts, and beneficial ownership falls under BOI and FBAR regulations, and treasury invariably holds a significant stake in these areas, it is important for treasury to act now. Ensuring prompt, accurate, and efficient BOI reporting is vital for regulatory compliance, penalty avoidance, and risk mitigation.  

To facilitate this process, we encourage treasury professionals to download, review and benefit from Strategic Treasurer’s white paper BOI: What Treasurers Need to Know Now. Furthermore, for a comprehensive understanding of FBAR filing nuances, please download and review Strategic Treasurer’s white paper Compliance Fundamentals: FBAR Filing and Treasury.

 

⃰ Disclosure: Strategic Treasurer owns CTMfile.