COMPLIANCE - ENFORCEMENT - PENALTIES

..... KEEP READING BELOW FOR MORE INFO .....

What happens if a reporting company does not report beneficial ownership information to FinCEN or fails to update or correct the information within the required timeframe?

FinCEN is working hard to ensure that reporting companies are aware of their obligations to report, update, and correct beneficial ownership information. FinCEN understands this is a new requirement. If you correct a mistake or omission within 90 days of the deadline for the original report, you may avoid being penalized. However, you could face civil and criminal penalties if you disregard your beneficial ownership information reporting obligations. (You do NOT want this to happen and we are here to help you keep that from happening)

..... BE SURE TO KEEP READING BELOW FOR MORE INFO .....

What penalties do individuals face for violating BOI reporting requirements?

As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

(SOME THOUGHTS: As this is a new requirement, I anticipate FinCEN will cut nonfilers and late filers "some slack" IN THE BEGINNING, HOWEVER, if you are willfully ignoring or defying this new law, I expect they will assess fines and maybe even file criminal charges against nonfilers, if their actions are flagrant - PERSONALLY, I DON'T WANT TO CHANCE IT - FILE AND THEN BE DONE WITH IT IS MY MOTTO)

Is a reporting company responsible for ensuring the accuracy of the information that it reports to FinCEN, even if the reporting company obtains that information from another party?

Yes. It is the responsibility of the reporting company to identify its beneficial owners and company applicants, and to report those individuals to FinCEN.

At the time the filing is made, each reporting company is required to certify that its report or application is true, correct, and complete.

Accordingly, FinCEN expects that reporting companies will take care to verify the information they receive from their beneficial owners and company applicants before reporting it to FinCEN.

Who can be held liable for violating BOI reporting requirements?

Both individuals and corporate entities can be held liable for willful violations. This can include not only an individual who actually files (or attempts to file) false information with FinCEN, but also anyone who willfully provides the filer with false information to report. Both individuals and corporate entities may also be liable for willfully failing to report complete or updated beneficial ownership information; in such circumstances, individuals can be held liable if they either cause the failure or are a senior officer at the company at the time of the failure.

Can an individual who files a report on behalf of a reporting company be held liable?

Yes. An individual who willfully files a false or fraudulent beneficial ownership information report on a company’s behalf may be subject to the same civil and criminal penalties as the reporting company and its senior officers.

Can a beneficial owner or company applicant be held liable for refusing to provide required information to a reporting company?

Yes. An enforcement action can be brought against an individual who willfully causes a reporting company’s failure to submit complete or updated beneficial ownership information to FinCEN. This would include a beneficial owner or company applicant who willfully fails to provide required information to a reporting company.

What should a reporting company do if a beneficial owner or company applicant withholds information?

While FinCEN recognizes that much of the information required to be reported about beneficial owners and company applicants will be provided to reporting companies by those individuals, reporting companies are responsible for ensuring that they submit complete and accurate beneficial ownership information to FinCEN.

Starting January 1, 2024, reporting companies will have a legal requirement to report beneficial ownership information to FinCEN. Existing reporting companies should engage with their beneficial owners to advise them of this requirement, obtain required information, and revise or consider putting in place mechanisms to ensure that beneficial owners will keep reporting companies apprised of changes in reported information, if necessary.

Beneficial owners and company applicants should also be aware that they may face penalties if they willfully cause a reporting company to fail to report complete or updated beneficial ownership information.

Persons considering creating or registering legal entities that will be reporting companies should take steps to ensure that they have access to the beneficial ownership information required to be reported to FinCEN, and that they have mechanisms in place to ensure that the reporting company is kept apprised of changes in that information.

DISCLAIMER

Stanley Bronstein is a lawyer and a CPA, but he is not your lawyer or CPA unless and until he is hired by you as your lawyer and/or CPA. The information and opinions contained herein are just that, information and opinions intended to help you learn about and understand your filing requirements under the new Corporate Transparency Act. The information contained herein should not be considered to be the giving of legal advice or accounting advice, unless and until you hire Stanley Bronstein as your lawyer and/or CPA.