It may sound too good to be true but it’s a fact. The newly-enacted Corporate Transparency Act (CTA) will require many businesses to register with the Financial Crimes Enforcement Network (FinCEN) starting January 1, 2024 or face civil penalties up to $500 per day and criminal penalties up to $10,000 per day and/or up to 2 years of jail time. By filing the Beneficial Owner Interest form, you can avoid these penalties, thus saving $500 per day!
The CTA is part of an Anti-Money Laundering Act of 2020. Read more here. RubinBrown has done a nice job summarizing the requirements in this blog post as has Hudgson Russ in this blog. FinCEN has more info here and FAQs here.
The reason for this new reporting is to try to combat the use of “shell” corporations that may be engaging in money laundering, financing of terrorism, and other no-nos. Most smaller private businesses whose ownership is not already public record, will be subject to the new requirements.
Although the online portal won’t be available prior to January 1, 2024, you’ll want to keep it top-of-mind, New businesses will have 30 days to submit the information: Businesses that form prior to January 1, 2024 will have until January 1, 2025 to report. There’s no cost to the business owner to report.
What could go wrong?
FinCEN is still creating the database that will house the info so that’s a potential for delay. Also, there are a LOT of businesses that fall into the category (like 32.6 million), so there’s a chance that the system will be swamped and websites will be down – as has happened in the past in similar situations.
Who Can See this Data?
According to the FinCEN website, the data will be housed securely in their new database (to be called BOSS for Beneficial Owner Secure System). There are six groups that can request the data, mostly government departments and financial institutions. See the full list here(#15). Could it be hacked? Sure, but it seems that most of the data they’re requesting is already available on the various Secretary of State websites.
Although Tiktok is lighting up with this new requirement, most of us will have a year to report and it doesn’t sound like late-filers will be automatically fined. Personally, I won’t be rushing to sign up. I’m planning to put it on my calendar for June, letting them get the bugs out but leaving myself a 6-month buffer, just in case.
Photo by Brett Jordan on Unsplash