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FinCEN issues Compliance Guide and FAQs to help small businesses report Beneficial Ownership Information

News Compliance Courier

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NEWS:  On September 18, 2023, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued its Beneficial Ownership Information (BOI) Small Entity Compliance Guide to help small business entities comply with the requirements of the BOI Reporting Rule. The Guide includes six key questions, with interactive flowcharts, checklists, and other tools to help business entities determine if they are required to file a BOI Report with FinCEN – and if so, how to comply with the reporting requirements.

FinCEN’s BOI Reporting FAQs

FinCEN also published its updated Beneficial Ownership Information (BOI) Reporting FAQs (as of September 18, 2023). These FAQs do not supplement or modify any obligations imposed by statute or regulation.

Under the Corporate Transparency Act (CTA), financial institutions will not have access to beneficial ownership information in certain circumstances, without the consent of the reporting company. However, FinCEN is developing the rules that will govern access to and handling of beneficial ownership information.

Reporting beneficial ownership information in the future

No one needs to report beneficial ownership information to FinCEN until January 1, 2024. FinCEN will not accept any information until the implementation date.

As a reminder:

  • A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report.
  • If the reporting company is created or registered to do business on or after January 1, 2024, the company will have 30 days to file the initial BOI report.
The form to report beneficial ownership information is not available yet. However, once available, the form will be posted on FinCEN’s beneficial ownership information webpage.

What companies will be required to report beneficial ownership information to FinCEN?

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.

What does this mean for credit unions?

As the BOI Small Entity Guide and BOI Reporting FAQs point out, credit unions are exempt from the BOI reporting requirements. This means credit unions will not be required to report beneficial ownership information.

Please keep in mind, this does not exclude credit unions from complying with existing customer due diligence (CDD) rules applicable to banks and credit unions vs. the new FinCEN rule.

The current CDD rules, which we explain in ii Release No. 0159, require financial institutions to gather information for:

  • Each individual, if any, who, directly or indirectly, owns 25% or more of the equity interests of a legal entity customer; and
  • A single, individual with significant responsibility to control, manage, or direct a legal entity customer, including an executive officer or senior manager, such as a Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operation Officer (COO), Managing Member, General Partner, President, Vice President, or Treasurer – or any other individual who regularly performs similar functions.

Under the current CDD rules, credit unions are still required to collect, from legal entity customers, information about any individual(s) that are beneficial owners, unless the entity is excluded, or the account is exempt. Therefore, financial institutions must obtain from their legal entity customers the identities of individuals who satisfy the definition.

What can credit unions expect in the future?

Even though credit unions are exempt from the BOI reporting requirements, things could change in the future. We can expect that FinCEN may require financial institutions to change their systems to gather information about all persons exercising substantial control of a company that opens an account, rather than just one.

Resources

For more information please click on the links below.

You can also reference The League’s previously published Compliance Courier, titled FinCEN finalizes “beneficial ownership information” rule, from October 11, 2022, here.

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