What is the New BOI Rule?

The new Beneficial Ownership Information (BOI) rule is a federal requirement that mandates many companies operating in the United States to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

Understanding the Beneficial Ownership Information (BOI) Rule

The Beneficial Ownership Information (BOI) reporting rule is a significant new regulation designed to enhance transparency and combat illicit financial activities such as money laundering, terrorism financing, and other financial crimes. It achieves this by requiring certain companies to disclose who ultimately owns or controls them.

Key Aspects of the New BOI Reporting Requirements

These rules, which went into effect on January 1, 2024, introduce new responsibilities for many entities. The core purpose is to identify the individuals who benefit from or exercise substantial control over a company, rather than just the legal owners.

• Effective Date: The new reporting requirements officially began on January 1, 2024. This means that companies subject to the rule must now identify their beneficial owners and prepare to submit this information.
• Who Must Report? The rule broadly applies to "reporting companies," which include corporations, limited liability companies (LLCs), and other similar entities created or registered to do business in the United States. There are, however, specific exemptions for certain types of entities (e.g., highly regulated entities, large operating companies, and tax-exempt organizations).
• What Information is Required? Reporting companies must provide identifying information about the company itself, as well as detailed information about their beneficial owners. This typically includes:
  • Full legal name
  • Date of birth
  • Current residential or business street address
  • A unique identifying number from an acceptable identification document (e.g., passport or driver's license), along with an image of that document.
• Definition of Beneficial Owner: An individual is considered a beneficial owner if they directly or indirectly:
  • Exercise substantial control over the reporting company (e.g., senior officers, those with authority to appoint or remove officers/directors, or anyone with substantial influence over important decisions).
  • Own or control at least 25 percent of the ownership interests of the reporting company.
• New Due Diligence Requirements: Companies are now faced with new due diligence requirements to accurately identify and verify their beneficial owners, ensuring compliance with the rule.

Practical Implications for Companies

For companies, understanding and adhering to the new BOI rule is crucial to avoid potential penalties. It necessitates a thorough review of corporate structure and ownership.

• Identify Reporting Status: Determine if your company is a "reporting company" or if it qualifies for an exemption.
• Identify Beneficial Owners: Accurately pinpoint all individuals who meet the definition of a beneficial owner.
• Gather Required Information: Collect all necessary personal information and identification documents for each beneficial owner.
• Submit Reports to FinCEN: Reports are filed electronically through FinCEN's secure online filing system.

For more detailed guidance, companies should refer to official resources from the Financial Crimes Enforcement Network (FinCEN). Learn more about Beneficial Ownership Information (BOI) Reporting.