Starting January 1, 2025, companies in the U.S. that fail to comply with FinCEN's requirements for reporting beneficial ownership information will face significant financial penalties. This date marks the final deadline for many businesses to fulfil their registration obligations. Companies must act swiftly to determine whether they are subject to these requirements and to prepare their filings in time.
From January 1, 2024, the U.S. will implement a database of beneficial ownership information akin to Poland's Central Register of Beneficial Owners (CRBR). This requirement stems from the Corporate Transparency Act (CTA), part of the National Defense Authorization Act, effective since January 1, 2021.
Purpose of the Corporate Transparency Act
The Corporate Transparency Act is designed to collect beneficial ownership information to combat terrorism, money laundering, and other illicit business activities. The goal, according to the Act, is to dismantle anonymous shell companies that have long been the preferred tools for money launderers, terrorists, and criminals.
Under the CTA, many businesses must report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), an agency under the U.S. Department of the Treasury. While the information will not be publicly accessible, FinCEN is authorized to share it with:
- Federal law enforcement agencies in the U.S.
- Other law enforcement agencies with court approval.
- Non-U.S. law enforcement, prosecutors, or judges upon request from a U.S. federal law enforcement agency.
- Financial institutions and their regulators, with the company's consent.
Deadlines and Reporting Requirements
Newly formed companies must submit beneficial ownership information within 90 days of receiving official company registration confirmation. For companies formed before 2024, the deadline is January 1, 2025. Companies established after January 1, 2025, will have just 30 days to file their reports. Penalties for failing to meet these requirements include fines of up to $591 per day for late submissions.
Historical Background and Implementation
The introduction of the beneficial ownership reporting requirement is the culmination of more than a decade of efforts by the U.S. Congress to increase business transparency. Once fully implemented in 2024, FinCEN will manage a comprehensive database of beneficial ownership information.
Prior to the Corporate Transparency Act, financial institutions bore the responsibility of identifying and verifying beneficial owners under due diligence requirements set forth by the Bank Secrecy Act. Beginning in 2024, this burden shifts from financial institutions to reporting companies, with strict penalties for noncompliance or unauthorized disclosure of information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
