BUFFALO, N.Y. — The U.S. Department of Treasury’s Financial Crimes Enforcement Network, or FinCEN, will soon have more information to battle the unknown in Corporate America.
“There’s been an ever-present issue of companies that are owned and operated by people in the shadows, meaning we know nothing about them,” Tully Rinckey attorney Ryan McCall said. “They could be money laundering. They could be doing things for terroristic threats against the United States. We just don’t know.”
Congress passed the Corporate Transparency Act as part of the National Defense Authorization Act for the 2021 fiscal year. However, McCall said it officially went into effect this month. LLCs, corporations and affiliated entities with few exemptions are required to fill out a Beneficial Ownership Information report.
“It’s very simple information that’s being disclosed,” he said. “It’s basically taxpayer ID information or social security number, name, address, things like that.”
McCall said the law is primarily to help weed out money laundering, financial backing of terrorist activities and non-payment of taxes.
The Treasury is compiling the report into a database potentially available to law enforcement, courts and financial institutions. McCall said businesses formed in 2024 have 30 days to file a report while those formed prior have one year.
“That clock is still somewhat running but it’s just important to know that if I formed an LLC in 2023 or 2022, I should make sure that I check the box and make sure that I’m at least disclosing I own this company, this address is here, this is how to get a hold of me and it should really only take 10 or 15 minutes,” he said.
McCall said businesses should know while the report is relatively simple, the consequences for non-compliance can be serious. The government can institute civil penalties of up to $500 for each day a company is in violation and criminal penalties of up to two years in prison and $10,000 fines.
“You want to make sure you’re in compliance and again this is something that is very easily accomplished, especially if you’re a small business owner, and I highly recommend reaching out to somebody who knows what they’re doing when it comes to being able to finish this and complete this,” McCall said.
A beneficial owner is an individual who, directly or indirectly, exercises substantial control over the reporting of the company or owns or controls at least 25% of its interests.
