Rule for Beneficial Ownership Reporting (2022)
fincen.gov
fincen.gov
I shared this because a CPA recently told me that very few people seem to know that this change is coming. It was the first I had heard of it and obviously doesn't impact most people. But it seemed like a big deal since it goes after those using anonymous shell companies to hide things.
> When filing [Beneficial Ownership Information] reports with FinCEN, the rule requires a reporting company to identify itself and report four pieces of information about each of its beneficial owners: name, birthdate, address, and a unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of such document).
While I could wish this information would be public in the same way as eg. SEC form 4 filings, this rule really does feel (to me, a rank layman) like a big step forward for corporate transparency... to government, at least. Still pretty exciting!
Any corporate legal eagles out there who have an actual informed perspective to share on this new rule and its possible effects?
[1]: https://www.fincen.gov/beneficial-ownership-information-repo...
oh absolutely, that would very useful for when you want to find where varrious people that you'd like to murder live when they unhelpfully owned their home via an entity to keep their address private.
As it is you'll just have to wait for fincen to leak or sell the data, since thankfully congress provided for no meaningful consequences for this datas disclosure or misuse.
I actually think the ownership reporting is a good idea, but I feel the privacy concerns are the only valid criticism of it.
Why? What is a legitimate reason for anybody (except a tax authority, a bank or a court of law) to need to know who owns a business? I'm curious if there are any. For my whole life I never wanted to know this about any business. If a company would wrong me badly enough I would sue itself, then a court of law would summon the owner if necessary to resolve the case. How owning a company makes seriously more sense to be public information than owning anything else like a bookcase, a MacBook, a language skill or an HN account?
One sort of amusing example from recent memory: https://www.npr.org/2019/06/06/730375237/nyc-operation-meltd...
Perhaps it is, but this doesn't mean it should be, nor that we can afford to leave it this way forever. It's a government agencies' job and we should rather fix them to the extent so they can do this job efficiently enough. Today the world has became so wild of information abusers that maintaining privacy/anonymity becomes a necessity even for a lawful good person to stay safe. This is why we really need trusted policing parties to be the only who have our data, this became important like never before and will only grow more important. Perhaps an alternative can be in creating licensed private agencies (to build competition and have agencies incentivized enough) and penalizing their wrongdoings severely so they think carefully before any move they do to make sure it can't destroy anyone's life unnecessarily. Even besides intentionally malevolent parties, any bullshit "journalist" from anywhere in the world can carelessly present your data in a catastrophically harmful way for sake of hype and click-bait and suing them (let alone neutralizing the harm they've done) will probably be nonviable for you.
> One sort of amusing example from recent memory: https://www.npr.org/2019/06/06/730375237/nyc-operation-meltd...
To me defrauding the New York City (a $886 billion GDP entity) for $4.5 million in fines it potentially could have collected seems harmless enough to leave it unpunished when the alternative is to endanger every single person to loose comparable amounts (even when they don't have this much so they go negative). To me it seems more important to protect an ordinary human (e.g. under $10 mil. net worth so they can't hire an army of lawyers, enforcers and influences and give them a carte-blanche) from their life being ruined than protecting a multibillion dollar bureaucratic entity which just didn't care to build a system reliable enough to prevent some millions in lost profit from leaking through its fingers.
Now only government departments and banks are able to access those registries. That's very inconvenient, for instance, for non-bank lenders, who still have a regulatory obligation to ascertain the UBOs of who they lend to.
> Failure to meet the reporting requirements or unauthorized disclosure of BOI can result in civil or criminal actions. Willful failure to file a complete initial or updated report with FinCEN is subject to a US$500-per-day fine (up to US$10,000) and imprisonment for up to two years.
So basically they have a massive database of horribly inaccurate data. From what I gather, the only people who would get in trouble for not submitting are the ones already on the IRS radar. The FinCEN database is used more to add on top of an investigation than initiate one.
I'd love to see someone prosecuted for failure to report as a single violation (i.e. no other tax or financial crimes involved). I assume the lawyers for the defense would have a field day sowing doubt in the judges mind as to whether or not someone truly failed to report (e.g. missing or corrupted data, IT errors, etc).
Yes
It should be public
Not driver's license and address. That should be private.
In the case of this Beneficial Ownership information there are no such assurances, even though the much stronger ones for tax records turned out to be woefully inadequate.
When I started my first company, I made the mistake of putting my real address on all government forms and was immediately inundated with junk mail in volumes I had never seen before. I had no choice but to stop all mail at that address. Ever since then, I’ve used mail forwarding services and filed in Delaware. It provides legitimate protection from a broken mail system.
FinCEN claims they are going to put controls in place around how the personal information database can be accessed and used but come on, does anyone actually think that’s going to be effective?
I would be excited for this change if it came with meaningful penalties for abuse of my personal information, including junk mail. But then I suppose the post office would start hemorrhaging even more money and advertisers would rally around fighting it.
Even if none of the above were true and they blindly forwarded all mail, it would still be helpful because at any time you could stop the mail forwarding without stopping all mail at your real address. So for example, if you got overwhelmed with junk mail from your forwarded address, you could just stop the mail forwarding service and your family would still be able to send you mail directly. It’s similar to Apple’s Hide My Email but for snail mail. When you want to disassociate from an address, you just delete it.
Now, of course, as with most things in life, this can be used for good or for evil. Anonymity both causes and solves problems. The question is, is it a human right? I believe it should be, but maybe not if you hold certain positions of power. Defining that is tricky, though.
I think most people would trade in their anonymity for fortune or fame, at least until they had experienced it, but not everyone would.
Very doubtful. Small inconvenience for the oligarchs (is it a crime to be an oligarch by the way?) and drug traffickers, lot of inconvenience for a lot of innocent people. In my opinion, the war on financial privacy has been a net negative for society. A massive cost with little reward. Global AML compliance cost alone is estimated at ~300$ billion/year and that doesn't account for the invisible cost (e.g. billions of unbanked and underbanked people). How much crime does it really stop?
[0] https://www.forbes.com/advisor/banking/costs-of-being-unbank...
plenty of time to repeal or debilitate this in the annual NDAA
> Many of these exempt entities are already regulated by federal and/or state government, and many already disclose their beneficial ownership information to a governmental authority.
The one exemption that I found unexpected was the following:
> (xxi) Large operating companies with more than 20 full-time employees, more than $5,000,000 in gross receipts or sales, and an operating presence at a physical office within the United States.
It's not clear to me why such entities need to be excluded from reporting. It's true that they are much less likely to be shell companies, but still...why? Also, get below $5M one year or let go of your 21st employee, and get ready for the left-field fine from FinCEN.
[1]: https://www.fincen.gov/sites/default/files/shared/BOI_FAQs_F...
I think this seems to be the clear answer though. Such a business is not trivially filed into existence.
> The bill is constructed to exempt many legitimate businesses, and the information requested is already provided by most companies in the normal course of business. Collecting beneficial ownership information at the time of incorporation relieves later compliance burdens for legitimate businesses, while at the same time prevents illegitimate businesses from operating in secrecy.
That is, the regulation should impact as few businesses as possible while still achieving its goals, so any company that fits into the mold of almost-certainly-not-a-secret-shell-company should be exempted if possible.
Regarding the "left-field fine", that's presumably why businesses have a 30-calendar-day period to report that they are no longer exempt. But obviously, that isn't going to help if the business is unaware of the reporting requirement. Perhaps the requirement on new businesses is expected to spread awareness before the requirement on existing businesses comes into effect.
[0] https://www.govinfo.gov/content/pkg/PLAW-116publ283/pdf/PLAW... (big PDF warning)
[1] https://www.congress.gov/115/crec/2017/08/02/CREC-2017-08-02...
To me, it's the 20 FTEs requirement that is the most unexpected. The small businesses that I or the people I know have worked at or have interacted with were generally in the 2-10 FTE range.
For what it's worth, I personally have nothing against the spirit of this regulation. Corporations and LLCs are legal structures provided by the government. The (federal) government not always knowing who the beneficial owners are is an implementation artifact. FinCEN should have access to this information; I just wish that they would talk to the states about it instead of threatening individual owners with penalties and jail for not reporting to them directly.