Is Your Organization One of FinCEN’s Reporting Companies?

Financial reporting is an obligation that all U.S.-based companies must comply with. Since the passage of the U.S. Corporate Transparency Act (CTA) in January of 2021, the reporting requirements have changed for many businesses. 

The passage of the CTA was followed by draft regulations passed by the U.S. Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury.

What Kind of Reporting Does FinCEN Enforce?

FinCEN is the financial intelligence unit of the U.S government tasked with enforcing the rules of the U.S. financial system. The network assesses criminal activity and terrorism associated with financial reporting — such as money laundering — through the authority of its office.

By collecting, analyzing, and acting on information associated with corporate financial filings, FinCEN is able to assess any potential threats.

FinCEN offers leadership for other agencies through its strategic threat disruption activities and framework for combatting the financing of terrorism and other criminal activity. The network’s stated goal is to build the necessary workforce competencies to improve national security.

What Is a Beneficial Owner?

An Ultimate Beneficial Owner (UBO) is the individual who can be said to own, manage, benefit from, or control an organization in some way. The idea of a beneficial owner is to establish accountability on the part of individuals who have some value-based stake in each reporting company. 

Because fraud often takes place when creating ownership structures for organizations, the beneficial owner ensures a natural person, whether they have direct or indirect involvement in operations, can be held accountable for the organization’s financials.

The beneficial owner often comes down to the shareholding agreement, in which an indirect form of benefit is often gained. By establishing at least one beneficial owner per company, individuals with substantial control can be held liable for the financial information reported to FinCEN.

Which Companies Are Required to Report Their Beneficial Owners to FinCEN?

Reporting requirements extend to all foreign and domestic agencies that registered in the U.S. before and after the CTA was established. Existing entities will have one year after the publication of the regulations to comply while new entities have only two weeks. 

Subsequent reports must be filed if any changes take place, if owners move, or if they change their name. At this point, they have only 30 days to comply before legal action may be taken.

Examples of companies required to report their beneficial owners include: 

  • Non-exempt corporations and LLCs
  • Foreign entities doing business in the U.S.
  • Any other U.S. entity created by filing a document

According to the CTA, any applications must report, including the beneficial owners and any individuals who applied. This rule means that those who executed the filing or directed it in any way are required to report to FinCEN. If it’s discovered that any errors were reported, then the company has two weeks to report the updated information.

What Are the Potential Penalties?

For entities that fail to report or misreport without correcting on time, there are many potential costs. Non-compliance is unlawful. Those entities that don’t meet the guidelines laid out by the CTA can see financial penalties of up to $10,000 or face imprisonment. 

Civil and criminal penalties can be attributed to anybody who knowingly provided or attempted to provide false information. This setup gives FinCEN a great deal of leverage over entities that misreport their financial information. Generally, the beneficial owner will be held accountable when penalties are applied.

How Do I Maintain Compliance?

Businesses that want to reduce the potential for legal liabilities with accurate reporting should have strong governance practices in place. By accounting for potential compliance requirements and offering the needed training beforehand, entity managers can stay on top of the latest legislative requirements.

Corporate database software offers a powerful solution for organizations that want to track and manage their vital data. This approach lets you collect and manage contracts, spreadsheets, and other important financial documents in a single centralized location. 

By leveraging technology and HR, you’ll have access to the administrative talent you need to efficiently collect, manage, and report financial data. For entity managers who want to get the most out of their financial reporting, consider leveraging entity and subsidiary management software.

Stay on Top of Your Reporting with Athennian

Are you required to report financial information to FinCEN but unsure where to start? At Athennian, we simplify entity management with software built for compliance. Don’t lose track of your financial reporting requirements. Our subsidiary management tools make your reporting more efficient and less stressful.

Athennian’s platform gives you everything you need to effectively scale your entities and create corporate simplification. We’ll work with you to transform your entity management strategy so you can focus on your core business. Organize transactions, secure architecture, and cut costs by deploying our security and IT solutions. 

Financial reporting requires strict control over how assets are managed. With our cloud-based services, you’ll get the most out of your entity management software. Request a customized demo with a business entity management expert!

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