By David P. Donnelly, CPA-Houston
FinCEN, the Financial Crimes Enforcement Network, is proposing new regulations that will require disclosure of the beneficial ownership of newly formed and existing business and other entities. The proposed rules will implement reporting requirements under the Corporate Transparency Act, which was part of the Anti-Money Laundering Act of 2020 that became law Jan. 1, 2021.
Beneficial ownership is described as an individual who exercises substantial control over the company or owns or controls at least 25% of the ownership interest in the company.
Reports for newly created or registered companies would be due to FinCEN within 14 days of creation or registration. Existing entities would have one year from the effective date of these regulations to report. Any changes in beneficial ownership are required to be reported within 30 days.
Information to be reported will include the full legal name of the beneficial owner, the owner’s date of birth, current residential address and a ”unique identifying number from an acceptable identification document.” It appears that once registered, an individual will be provided with a “FinCEN identifier.” The proposed rules specify that the reporting company provide a scanned copy of the ”acceptable identification document.” At present, there does not seem to be a requirement to provide the tax identification number of the beneficial owner.
The penalty for not reporting or for a person to ”willfully provide or attempt to provide, false or fraudulent beneficial ownership information” is $500 per day; there are also potential criminal penalties.
FinCEN’s notice of proposed rulemaking (NPRM) estimates the cost to prepare these reports at $45 each. CPAs in public practice will no doubt be called upon to prepare these reports for their clients. Given the time required to acquire the appropriate information, compile it, prepare the yet-unissued form(s) and comply with any reasonable document retention requirements, the FinCEN’s estimate of the cost to prepare these reports seems wildly optimistic.
The NPRM was issued on Dec. 7, 2021, and the comments period closes on Feb. 7, 2022.