US Treasury Bureau Releases Beneficial Ownership Reporting Guide, Industry Displeased

By Brett Wolf

U.S. Treasury Department’s anti-money laundering bureau has released a much-anticipated guide aimed at helping small businesses comply with the beneficial-ownership information (BOI) reporting rule coming into force on January 1, 2024. Those affected by the rule, however, said that FinCEN’s guide is inadequate, and lobbyists and professionals are pressing Congress to take action to give entities more time to comply.

Treasury’s Financial Crimes Enforcement Network (FinCEN) published the Small Entity Compliance Guide on Monday. See FinCEN Publishes Small Business BOI Reporting Compliance Guide.

Starting in 2024, many entities created in or registered to do business in the United States will be required to report information about their beneficial owners — the individuals who ultimately own or control a company — to FinCEN.

The registry’s goal is to combat the abuse of shell companies, which for decades has allowed criminals to maintain anonymity while enjoying their ill-gotten gains. Among other things, FinCEN’s guide is intended to help businesses determine if they are required to report their beneficial ownership information (BOI), the Treasury bureau said in a written statement.

“This guide is the latest in our ongoing efforts to educate the public about these important new requirements,” said Andrea Gacki, FinCEN Director. “We are committed to making this process as simple as possible, particularly for small businesses.”

The guide addresses some core issues, including each of the BOI reporting rule’s provisions, answers to key questions, and interactive checklists, infographics, and other tools aimed at helping businesses comply.

When announcing the guide on Monday, FinCEN said it will provide additional guidance on how to submit beneficial ownership information “soon” and noted that small businesses “can continue to monitor FinCEN’s website for more information or subscribe to FinCEN updates.”

Corporate Transparency Act.

FinCEN’s BOI reporting rule stems from the Corporate Transparency Act (CTA), enacted by Congress as part of the Anti-Money Laundering Act of 2020 (AMLA), and forms part of a push to hinder the widespread abuse of legal entities by criminals.

To implement the CTA, FinCEN issued a 330-page final rule outlining BOI reporting requirements, which significantly affect small businesses, in September 2022.

If current deadlines remain unchanged, companies formed or registered before January 1 will have one year to comply. Companies formed or registered after that date will have 30 days from the date of formation or registration to comply.

As reported in July, FinCEN faced withering criticism during a hearing held by the U.S. House Financial Services Committee’s Subcommittee on National Security, Illicit Finance, and International Financial Institutions. A primary concern expressed by many during the hearing was a lack of educational outreach to small businesses.

Important questions remain.

Jim Richards, a former Bank Secrecy Act compliance officer at Wells Fargo who testified at that hearing, told Regulatory Intelligence on Monday that after reading FinCEN’s new guide, he still has questions, including why the document does not contain the reporting form.

“How will the guidance get to 35 million small businesses? Through trade associations? The National Association of Secretaries of State? And what about the reporting form?” he said.

There is another important question that remains unanswered. In mid-August, FinCEN made a filing with the Office of Information & Regulatory Affairs (OIRA) titled, “Beneficial Ownership Information Reporting Deadline Extension for Reporting Companies Created or Registered in 2024.”

The filing contains no explanatory text, creating uncertainty about potential effects on reporting deadlines.

FinCEN did not immediately respond to a query regarding all the above questions; however, one source familiar with the matter said the FinCEN filing with OIRA supports a belief among lobbyists that FinCEN — under pressure from Republicans — is apt to provide some kind of administrative relief in terms of BOI filing deadlines.

FinCEN guide ‘demonstrates problems.’

Kevin Kuhlman, vice-president of the National Federation of Independent Business (NFIB), who also testified at the above-mentioned Subcommittee on National Security, Illicit Finance, and International Financial Institutions hearing, said the new FinCEN guide “more demonstrates the problems than answers the questions.”

“What I think the compliance guide demonstrates is what began as ‘a simple and basic request’ for four pieces of information has turned into a very complicated 56-page compliance guide … that will overwhelm small businesses,” Kuhlman said on Monday.

“NFIB would be supportive of taking a pause — delaying the requirements either administratively or by legislation — to improve the outreach, simplify the process, and allow business owners to better understand their compliance responsibilities,” he said.

Accountants scramble under BOI rule pressure.

The American Institute of Certified Public Accountants (AICPA), the national professional organization for certified public accountants (CPAs), recently called on members to contact their congressional representatives and urge them to back legislation that would delay implementation of the BOI rule.

Two bills have been introduced in Congress to delay the rule, HR 4035 and S 2623, both titled, “The Protecting Small Business Information Act of 2023.” It remains unclear whether Congress will take action to enact the legislation, however.

CPAs will be doubly impacted by the BOI rule. Not only will small CPA firms themselves be required to report their BOI, but many small businesses will be looking to CPAs for help with their filings.

Following FinCEN’s release of the guide on Monday, Melanie Lauridsen, vice president of tax policy & advocacy with the AICPA, told Regulatory Intelligence that the document was appreciated, but added that “further clarity is still needed before small businesses can move forward with filing.”

This article first appeared in Thomson Reuters Regulatory Intelligence News.