What to Expect After the BOIR First Filing Deadline?

The first filing deadline for the Beneficial Ownership Information Report (BOIR), a mandate under the Corporate Transparency Act (CTA), is quickly approaching. This new federal regulation requires businesses across the United States to report key information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). But what happens after this initial filing deadline has passed?

As businesses prepare to file, it’s essential to understand the responsibilities that continue beyond the deadline. Meeting the deadline is only the beginning; ongoing compliance with the BOIR is necessary to avoid penalties and ensure continued adherence to this transparency law. This article will discuss what businesses can expect after submitting their initial BOIR, including ongoing filing requirements, updates, compliance checks, and potential penalties for non-compliance.

Understanding the BOIR and Its Purpose

The Beneficial Ownership Information Report (BOIR) is a key component of the Corporate Transparency Act (CTA), passed as part of a broader effort to increase corporate transparency. The CTA is aimed at curbing the use of anonymous shell companies often used for illegal activities, such as money laundering, tax evasion, and terrorist financing.

By requiring U.S. companies to disclose their beneficial ownership information—including names, dates of birth, addresses, and unique identifiers (such as a driver’s license number or passport number) of individuals who own or control at least 25% of the business—FinCEN aims to create a centralized registry. This registry will make it easier for authorities to track ownership and hold individuals accountable for their business activities.

Initial Filing: A Compliance Milestone

For many companies, the initial filing due by January 1, 2025 represents a critical milestone in compliance. After completing the initial BOIR, companies can breathe a sigh of relief, but there are still obligations to fulfil after this first step. Businesses must remain proactive in their approach to compliance to avoid penalties in the long term.

1. Ongoing Reporting and Update Requirements

One of the primary ongoing obligations after the initial BOIR submission is updating beneficial ownership information when changes occur. The CTA mandates that any significant changes in ownership or control must be reported to FinCEN within 30 days of the change. These updates are crucial to ensure the centralized database remains accurate and reflective of the current ownership structure.

Examples of Events Requiring an Update

• Addition of a New Beneficial Owner: If an individual acquires a 25% or greater stake in the company or gains substantial control, the BOIR must be updated to include their information.
• Change in Ownership Structure: If a beneficial owner transfers their ownership stake, the company must update FinCEN to reflect the new structure.
• Change in Existing Owner’s Information: Updates are also necessary when there is a change in an existing beneficial owner’s information, such as a new address or updated identification information.

Failing to submit timely updates can lead to non-compliance penalties, so it’s essential for businesses to monitor changes in ownership closely and report them promptly.

2. Annual Compliance Reviews

As part of ongoing compliance, companies are encouraged to conduct annual reviews of their beneficial ownership information. While FinCEN does not currently require an annual report submission, conducting an internal compliance check annually can help businesses stay on top of any unreported changes and maintain accuracy in their records.

Benefits of Annual Compliance Reviews

• Identifying Unreported Changes: Annual reviews can reveal changes that may have gone unnoticed, allowing businesses to make updates before FinCEN conducts its checks.
• Preparing for Audits: Regular reviews ensure that if FinCEN conducts an audit, the company’s records are up-to-date and compliant.
• Building a Culture of Compliance: For businesses, especially larger entities with complex ownership structures, periodic reviews instill a proactive approach to compliance.

3. Potential FinCEN Compliance Checks

FinCEN is tasked with managing the BOIR and ensuring that businesses remain compliant with the CTA. After the filing deadline, businesses should be prepared for potential compliance checks by FinCEN, which may include audits, investigations, or routine assessments of submitted data.

While not every business will undergo an audit, FinCEN reserves the right to verify the accuracy of beneficial ownership information. Ensuring accuracy in the initial filing and timely updates will be crucial for companies seeking to avoid fines or penalties.

4. Maintaining Secure Records and Documentation

For ongoing compliance, businesses should maintain secure and accessible records of their beneficial ownership information. FinCEN may request additional documentation to verify the information provided in the BOIR, and having organized records will streamline this process.

Key documents to retain include:

• Ownership agreements or contracts indicating beneficial ownership.
• Identification documents (copies of driver’s licenses, passports) for beneficial owners.
• Record of changes in beneficial ownership and documentation of when updates were submitted to FinCEN.

Having well-documented records allows businesses to respond quickly to any FinCEN inquiries or audits.

5. Penalties for Non-Compliance

Businesses that fail to meet BOIR compliance requirements after the filing deadline may face penalties. These penalties vary based on the severity and nature of the non-compliance, and they can include both civil and criminal consequences.

Civil Penalties

For non-compliance, FinCEN can impose fines of up to $500 per day until the information is accurately reported. In cases of accidental non-compliance, businesses can usually avoid the more severe penalties by quickly correcting their mistakes.

Criminal Penalties

Deliberate non-compliance or falsification of information is considered a criminal offense under the CTA. Individuals found guilty of providing false information can face fines up to $10,000 and may be subject to imprisonment for up to two years.

Businesses should take compliance seriously to avoid these harsh penalties. Proactively reporting changes and ensuring accuracy in all filings will help companies avoid any costly repercussions.

6. Future Implications of BOIR Compliance

Beyond the immediate requirements of maintaining BOIR compliance, the CTA’s implementation has broader implications for businesses in the United States. The transparency mandate is likely the beginning of a long-term trend toward increased accountability and scrutiny of beneficial ownership.

For businesses, staying compliant with BOIR can have several long-term benefits, including:

• Enhanced Business Credibility: Transparency in beneficial ownership can build trust with partners, investors, and customers.
• Improved Relationships with Financial Institutions: Many banks and financial institutions favor businesses with a transparent ownership structure. BOIR compliance can facilitate easier access to financial services and potential lending opportunities.
• Alignment with Global Standards: Many other countries have similar transparency requirements. By complying with BOIR, U.S.-based businesses are better positioned to meet international standards, especially if they operate in foreign markets.

7. Leveraging Professional Assistance for Ongoing Compliance

For businesses with complex ownership structures or those needing additional support to meet their BOIR obligations, consulting with compliance experts or legal professionals can be beneficial. Services offered by organizations like BOIR.org can provide guidance on filing, updates, and ensuring accuracy, saving businesses time and reducing the risk of non-compliance.

Final Thoughts: Preparing for a Transparent Future

The BOIR first filing deadline is an important milestone, but compliance doesn’t stop there. Meeting the Beneficial Ownership Information Report obligations requires continuous effort and vigilance. By understanding the requirements and taking proactive steps to maintain accurate and timely information, businesses can avoid penalties and contribute to a more transparent business environment in the United States.

Organizations like BOIR.org can help businesses navigate these new requirements with confidence. Whether you’re preparing for your initial filing or need ongoing compliance support, BOIR.org offers the expertise to ensure your business remains compliant and ready for any changes in the regulatory landscape.

For more information on BOIR compliance support and to get started with your initial filing or ongoing requirements, visit BOIR.org.