Financial Crime World

BOUET ISLAND FINANCIAL CRIME REPORTING REQUIREMENTS: ENTITY OWNERSHIP TRANSPARENCY TAKES CENTER STAGE

In an effort to enhance financial crime reporting and compliance, the Financial Crimes Enforcement Network (FinCEN) has issued a notice to customers clarifying the requirements for entities to report beneficial ownership information. This move underscores the importance of transparency in corporate governance and highlights the distinct obligations of both FinCEN and financial institutions.

Entity Obligations

Entities may be required to provide beneficial ownership information to both FinCEN and their financial institution, citing different reasons and collection methods. While financial institutions collect information for customer due diligence purposes, FinCEN gathers data under the Corporate Transparency Act (CTA).

Key Requirements

  • Reporting companies must submit reports starting from January 1, 2024.
  • Failure to comply with these requirements can result in severe fines and penalties, including imprisonment.

CLARIFYING THE REQUIREMENTS

FinCEN’s notice to customers emphasizes that entities may need to provide beneficial ownership information to both FinCEN and their financial institution, but the types of information collected differ between the two. For instance:

Key Differences

  • Social security numbers are not required for FinCEN reports, while they are necessary for financial institutions.
  • The reporting timeline varies depending on when an entity was created or registered:
    • Entities established prior to January 1, 2024, have until January 1, 2025, to report.
    • Entities formed in 2024 must file within 90 days of registration.
    • New registrations after January 1, 2025, require reporting within 30 days.

FINANCIAL INSTITUTION RESPONSIBILITIES

Financial institutions are also under the spotlight, with FinCEN urging them to educate their customers about the differences between CTA requirements and customer due diligence obligations. This includes:

Key Responsibilities

  • Alerting customers to the need for BOI reporting
  • Ensuring they understand the distinct collection methods of both FinCEN and financial institutions

As the regulatory landscape continues to evolve, entities must be aware of their obligations under the CTA and ensure compliance with FinCEN’s beneficial ownership information reporting requirements. Failure to do so can lead to significant consequences, making it essential for companies to seek guidance from a corporate governance advisor.