Puerto Rico Businesses Must Comply with New Financial Crime Reporting Requirements
Introduction
In September 2022, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Final Rule requiring certain types of businesses in Puerto Rico to disclose beneficial ownership information (BOI). The regulation aims to enhance national security, intelligence, and law enforcement agencies’ abilities to combat illicit activities.
What are Reporting Companies?
Under the Corporate Transparency Act, Reporting Companies must provide personal information on their beneficial owners and control persons to FinCEN. These reports will be released to authorized government agencies, financial institutions, and other users with stringent safeguards and oversight.
Types of Reporting Companies
There are two types of Reporting Companies:
- Domestic reporting companies: corporations, limited liability companies, and other entities created by filing a document with the Puerto Rico Secretary of State.
- Foreign reporting companies: formed under the law of a foreign country and registered to do business in Puerto Rico or any U.S. state.
Who are Beneficial Owners?
A beneficial owner is defined as an individual who exercises “substantial control” over the entity or owns at least 25% of its ownership interests. Members of a Reporting Company’s Board of Directors may also be deemed to have “substantial control.”
Compliance Requirements
Reporting Companies must submit their reports to FinCEN by specific deadlines:
- Established before January 1, 2024: submit report by January 1, 2025.
- Formed or registered between January 1, 2024 and December 31, 2024: submit report within 90 calendar days of formation or registration.
- Formed or registered on or after January 1, 2025: submit report within 30 calendar days.
After the initial report is filed with FinCEN, Reporting Companies will have to make additional filings if there are any changes to their reported information, which must be filed within 30 days after each change.
Consequences of Non-Compliance
Failure to comply with the reporting requirements may result in:
- Civil or criminal penalties
- Fines and imprisonment
- Reporting Companies and individuals who cause a company not to report or provide false or fraudulent BOI may also face penalties
Effective Date and Next Steps
The Final Rule becomes effective on January 1, 2024. Businesses in Puerto Rico must take proactive measures to:
- Review their ownership structures
- Identify beneficial owners
- Gather necessary information to meet the required deadlines