As a small business owner, it can be daunting to keep up with the ever-evolving regulations and requirements. One such requirement is the Financial Crimes Enforcement Network (FinCEN)'s new beneficial ownership information reporting requirement, which requires certain entities to disclose information about their beneficial owners. If you are unsure about this new rule and how it affects your business, don't worry. In this article, we will go over the details of the new requirement, including who made the change, why it was made, when it will be effective, and how to report the required information. Additionally, since CrossFirst Bank is a Preferred Lender with the Small Business Administration (SBA), we’ll take a look at how this rule impacts SBA loan applicants. Finally, we’ll explain how CrossFirst Bank's dedicated and experienced bankers can help guide you through the process, so you can focus on running your business.
FinCEN has implemented a new requirement for businesses to disclose information about their beneficial owners. This new rule, often referred to as the beneficial ownership rule, was part of the Corporate Transparency Act (CTA), an act included in the National Defense Authorization Act for Fiscal Year 2021. The primary aim of this requirement is to prevent and combat money laundering, terrorist financing, tax fraud, corruption, and other illicit activities, thus strengthening the anti-money laundering/countering the financing of terrorism (AML/CFT) framework, while minimizing the burden on businesses operating in the United States.
The beneficial ownership rule requires that certain entities, including domestic and foreign corporations and limited liability companies, must file reports with FinCEN that identify their beneficial owners and company applicants. Check out FinCEN’s Small Entity Compliance Guide to learn which companies must report. These reports entail names, addresses, dates of birth, and unique identifying numbers of the beneficial owners and applicants. According to FinCEN, “A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report.” If your company was created after January 1, 2024, there are different reporting requirements, detailed here.
FinCEN, a bureau of the U.S. Department of the Treasury responsible for safeguarding the financial system from illicit use, is responsible for enacting the beneficial ownership information reporting requirement. The goal is to increase transparency in the U.S. financial system and reduce the use of anonymous shell and front companies by illicit actors to hide their identities and engage in illegal activities.
To meet the requirement, businesses must fill out and file a report electronically with FinCEN. The report should include details about the entity, such as its name, address, jurisdiction of formation and registration, and company identification numbers. The report should also provide information about the beneficial owners and applicants, including names, dates of birth, addresses, unique identifying numbers, and images from identification documents. The reports can be submitted electronically to FinCEN.
If you’re applying for an SBA loan, you’ll have to identify direct and indirect owners of the Applicant. According to the SBA’s latest Standard Operating Procedure (SOP), “The Applicant must identify all Beneficial Owners of at least 20% of the Applicant and at least 51% of the total Beneficial Owners of the Applicant.” If you apply for an SBA loan through CrossFirst Bank, our SBA bankers will walk you through the process, and make you have provided the necessary information for the application to be processed.
Complying with FinCEN's new requirement for businesses to disclose information about their beneficial owners is a critical step toward combating money laundering, terrorist financing, corruption, tax fraud, and other illicit activities. CrossFirst Bank's dedicated and experienced business bankers are here to help guide our clients through the process to help ensure full compliance with the reporting requirements. Reach out to us if you have questions about the new reporting requirements or you need other financial guidance for your business.
Background
FinCEN has implemented a new requirement for businesses to disclose information about their beneficial owners. This new rule, often referred to as the beneficial ownership rule, was part of the Corporate Transparency Act (CTA), an act included in the National Defense Authorization Act for Fiscal Year 2021. The primary aim of this requirement is to prevent and combat money laundering, terrorist financing, tax fraud, corruption, and other illicit activities, thus strengthening the anti-money laundering/countering the financing of terrorism (AML/CFT) framework, while minimizing the burden on businesses operating in the United States.
Who Has to Report and When?
The beneficial ownership rule requires that certain entities, including domestic and foreign corporations and limited liability companies, must file reports with FinCEN that identify their beneficial owners and company applicants. Check out FinCEN’s Small Entity Compliance Guide to learn which companies must report. These reports entail names, addresses, dates of birth, and unique identifying numbers of the beneficial owners and applicants. According to FinCEN, “A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report.” If your company was created after January 1, 2024, there are different reporting requirements, detailed here.
Why?
FinCEN, a bureau of the U.S. Department of the Treasury responsible for safeguarding the financial system from illicit use, is responsible for enacting the beneficial ownership information reporting requirement. The goal is to increase transparency in the U.S. financial system and reduce the use of anonymous shell and front companies by illicit actors to hide their identities and engage in illegal activities.
How To Report
To meet the requirement, businesses must fill out and file a report electronically with FinCEN. The report should include details about the entity, such as its name, address, jurisdiction of formation and registration, and company identification numbers. The report should also provide information about the beneficial owners and applicants, including names, dates of birth, addresses, unique identifying numbers, and images from identification documents. The reports can be submitted electronically to FinCEN.
Impact on SBA Loan Applicants
If you’re applying for an SBA loan, you’ll have to identify direct and indirect owners of the Applicant. According to the SBA’s latest Standard Operating Procedure (SOP), “The Applicant must identify all Beneficial Owners of at least 20% of the Applicant and at least 51% of the total Beneficial Owners of the Applicant.” If you apply for an SBA loan through CrossFirst Bank, our SBA bankers will walk you through the process, and make you have provided the necessary information for the application to be processed.
Need Help?
Complying with FinCEN's new requirement for businesses to disclose information about their beneficial owners is a critical step toward combating money laundering, terrorist financing, corruption, tax fraud, and other illicit activities. CrossFirst Bank's dedicated and experienced business bankers are here to help guide our clients through the process to help ensure full compliance with the reporting requirements. Reach out to us if you have questions about the new reporting requirements or you need other financial guidance for your business.
Business
January 18, 2024 by CrossFirst Bank
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