There’s an upcoming deadline for companies in the United States.
Many firms and corporations created or registered to do business in the U.S. must comply with new regulations Jan. 1 implemented by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) under the Corporate Transparency Act (CTA).
Businesses classified as “reporting companies” must provide the government with beneficial ownership information (BOI) or “identifying information about the individuals who directly or indirectly own or control a company,” according to a FinCEN FAQ on the subject.
FinCEN’s Small Entity Compliance Guide said, “in general, a beneficial owner is an individual who owns or controls at least 25% of a company or has substantial control over the company, and a company applicant is an individual who directly files or is primarily responsible for the filing of the document that creates or registers the company.”
FinCEN’s goal is to build a comprehensive database of beneficial ownership information, which will help law enforcement identify and prevent money laundering, tax evasion, and the like. The reporting requirements are broadly aimed at keeping criminals from using anonymous shell companies to mask illegal income.
Exemptions exist for larger entities, including publicly traded companies, banks, credit unions and nonprofits, as well as entities that hit certain headcount and gross revenue benchmarks and have a physical presence in the U.S.
Companies created or registered before Jan. 1, 2024, must submit BOI reports by Jan. 1, 2025, while those founded or registered on or after Jan. 1, 2024, must submit the BOI report within 90 calendar days of registration.
For many business owners, the rule represents not just a regulatory hurdle but also an opportunity to reinforce their commitment to transparency. Still, concerns exist that many businesses are unaware of the BOI reporting rule.
Reporting companies must provide BOI, including full legal name, date of birth, current address and a unique identifier, such as a passport or driver’s license number. They must also provide company information, including trade names, addresses and taxpayer identification numbers.
For many small business owners accustomed to minimal regulatory filings, this level of disclosure could feel invasive. However, FinCEN said in the FAQ that the database will remain confidential and accessible only to authorized entities like law enforcement and federal agencies.
Still, the administrative burdens of reporting could disproportionately impact smaller enterprises, many of which lack in-house compliance teams.
The marketplace is already responding with purpose-built digital solutions. Identity and compliance platform Palm introduced an artificial intelligence filing tool Monday (Nov. 11), dubbed the Beneficial Ownership Information (BOI) Filing Assistant, to help speed the compliance process for small- to medium-sized businesses (SMBs).
“Automation is here to stay,” BILL Chief Customer Officer Sarah Acton told PYMNTS this week, noting that “for more and more businesses who are not adopting technology … my worry is they get left behind.”
By reducing costs associated with manual processing, error correction and external audits, AI-driven compliance systems allow smaller enterprises to maintain high standards without overspending. Freed from repetitive tasks, employees can instead focus on higher-value work.
Discussing banking-specific compliance, Sovos General Counsel Freda Pepper told PYMNTS this month that “the challenge is understanding and keeping up with the state requirements. It’s like a moving ball because the states are constantly changing their laws.”
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The financial crime prevention landscape remains dynamic, and it looks to stay that way.
Preventing criminals from using banks for financial crimes “has been a priority area, and you are going to see enforcement actions” that highlight compliance with the Bank Secrecy Act (BSA), Whitney Case, associate director of the enforcement and compliance division at FinCEN said Wednesday (Nov. 13).
“In the BSA/AML universe, we have a broad remit, so we are going to continue to see a variety of actions against a variety of financial institutions,” Case added.
In related news, FinCEN this week warned financial institutions about the danger of scams that use deepfake media created with generative AI.
“While GenAI holds tremendous potential as a new technology, bad actors are seeking to exploit it to defraud American businesses and consumers, to include financial institutions and their customers,” FinCEN Director Andrea Gacki said Wednesday. “Vigilance by financial institutions to the use of deepfakes, and reporting of related suspicious activity, will help safeguard the U.S. financial system and protect innocent Americans from the abuse of these tools.”
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