Qualifying businesses have just over 90 days before the U.S. Corporate Transparency Act (CTA) goes into effect. On January 1, 2024, the first Beneficial Owner Information report will be due, unless other guidance is provided by the Financial Crimes Enforcement Network (FinCEN). At this time, businesses should have everything in place and ready for reporting based on the guidance provided in 2022.
Three months is not much time, but you still have enough time to gather your data and compile it into the format required by FinCEN. Even if you’ve delayed determining whether your company is subject to CTA, you can still follow these steps and meet the compliance deadline.
Step One: Verify if you are a qualifying business.
The U.S. CTA applies to any business with gross annual receipts of less than $5 million domestic revenue and more than 20 employees. CTA is intended to prevent financial fraud and money laundering in smaller businesses, since other laws have targeted multinational corporations.
Step Two: Locate your ultimate beneficial owners (UBOs).
A beneficial owner is anyone who has more than a 25% ownership interest, or who has a “controlling interest” in the company. Senior board officers and stakeholders are considered beneficial owners. With due diligence, you can narrow your beneficial owners down to those with actual control and monetary interest in the company.
Step Three: Collect required reporting information on UBOs.
The CTA reporting requirements want current information on the company and each UBO, including names, addresses, birth dates, and corroborating documents. This information must be available for updates as needed.
Step Four: Determine if exemptions apply.
Publicly traded corporations, some financial companies, and other enumerated companies are exempt from CTA. If your company is exempt or becomes exempt at a later date, you will need to notify FinCEN.
Step Five: Assign a responsible party to collect and maintain your UBO database.
FinCEN recommends having a single individual or alternatively one department tasked with handling and filing the BOI reports. This prevents change errors as data is passed from one department to another. This individual will be responsible for updating other employees on changes to the CTA and reporting policies.
Step Six: Consider using entity management software.
If your business does not already use management software, now is the time to start. Entity management software enables your reporting party to centralize UBO information, update as needed, and report when required.
Step Seven: Establish an ongoing process within management to report all changes to ownership and control.
Anyone who is or may be considered a “beneficial owner” should be aware of CTA and reporting requirements and who must have access to their data.
Step Eight: Keep an eye on the calendar.
At this time, the deadline for the first BOI report is January 1, 2024. However, FinCEN has not finalized the actual reporting process. Businesses should have someone within their company tasked with checking the FinCEN website at least weekly to confirm any changes to the reporting date.
Reporting to the BOSS
FinCEN’s encrypted Beneficial Ownership Secure System (BOSS) will be online as of January 1, 2024. It will provide high-level Federal Information Security Management compliance and prevent disclosure of data to unauthorized personnel. This is essential, because the information being sent includes names, birth dates, and ID numbers such as drivers’ licenses and passports.
FinCEN recognizes that some companies may not be able to access the BOSS at first, particularly since the final form of the system is not yet in place. Batch filing and other transmission systems are being considered, but FinCEN has not issued any final guidance on how the reports will be sent, if the BOSS interface is not active.
The companies will be responsible for verifying and certifying the initial report as well as any follow-up reports and error corrections. Reports must be made whenever a UBO changes, or any change is made to the business information itself, such as a change of location, corporate structure, or operating system.
How Athennian Can Help
If all this sounds complex and vague, it is. Athennian has been following the progress of CTA for several years, and has provided businesses with information as it becomes available. Understanding key provisions of CTA and staying current with changes helps companies take immediate steps to locate their UBOs and develop procedures for compliance.
Knowing the changing rules and deadlines can help by providing you with time to adopt and implement entity management software. Athennian systems centralizes your UBO data and lets your responsible party access it the moment it’s needed. It also lets that data be updated from any location and still be accessible in its updated format when a report must be generated.
Since FinCEN requires a new report within 30 days of any change, having accurate information on hand is essential. Penalties for missed deadlines will be severe, so needing days or weeks to collect data is time you won’t have.
Our robust database system supports multiple platforms in multiple locations. If you need help preparing for new regulations, you need a powerful system that stays current with the latest Washington D.C. laws. Request your custom demo here.
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