All Reporting Companies Are Required To Report Their BOI to FinCEN by January 1, 2025—Then What?  

The federal Corporate Transparency Act (“CTA”)[1] requires tens of millions of business entities to report specified information concerning their beneficial owners[2] to the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury. In fact, in the release accompanying its final rule implementing the CTA,[3] FinCEN estimated that there would be at least 32.6 million non-exempt “reporting companies” required to report such beneficial ownership information (“BOI”) to FinCEN when the rule took effect on January 1, 2024, with millions more being added every year after that.[4] All of those tens of millions of reporting companies formed or registered to do business in the United States before January 1, 2024, are required to file their BOI with FinCEN by January 1, 2025.[5]

FinCEN has engaged in various efforts to alert the many millions of reporting companies of the new BOI reporting requirement. For example, FinCEN has conducted live outreach events all across the United States, including in Philadelphia, Houston, Chicago, and Queens, New York.[6] In August, FinCEN even released a YouTube video briefly describing the BOI reporting requirements and where to go to get more information and file a report.[7] But the video had only been viewed 4,279 times as of October 9, 2024. And FinCEN itself reported that as of August, its outreach efforts had only reached “100,000+ stakeholders and groups” through its beneficial ownership events.[8]

This has led to concern in Congress over the implementation of FinCEN’s BOI reporting rule and some efforts to again push back the date by which companies must file their BOI reports.[9] On July 9, Treasury Secretary Janet Yellen testified before the House Financial Services Committee. Rep. Zach Nunn, from Iowa, questioned whether Secretary Yellen would support his bill to extend the deadline for small businesses to comply with the BOI reporting requirement.[10] According to Rep. Nunn, only 2.7 million of the estimated 32.6 million companies that are required to file BOI reports with FinCEN by the end of the year had done so as of the date of the hearing.[11]

If that figure is accurate, full compliance with the new BOI reporting requirement by the end of 2024 is a pipe dream. Which raises the question: Then what?

Other than trumpeting its outreach efforts to let small businesses know about the new reporting requirement, FinCEN has had little or nothing to say about what it will actually do to enforce the requirement if (and when) millions of companies fail to file BOI reports as required.[12] In several of its more important commentaries on the new reporting requirement, FinCEN has pointed out the civil and criminal penalties provided in the CTA for failing to report as required.[13] In particular, the CTA provides for two reporting violations: (1) willfully providing, or attempting to provide, false or fraudulent BOI to FinCEN; and (2) willfully failing to report complete or updated BOI to FinCEN.[14] The CTA provides both civil and criminal penalties for willful reporting violations. The civil penalty is up to $500 (before being adjusted for inflation) for each day that the violation continues or has not been remedied, while the criminal penalty is a fine of not more than $10,000, imprisonment for not more than two years, or both.[15]

But the civil and criminal penalties apply only in the case of willful reporting violations. Under federal law, a criminal violation is generally “willful” only when the defendant acted with “knowledge that the conduct is unlawful.”[16] The standard is somewhat lower when willfulness is a statutory condition of civil liability, but the Government still has to show that the defendant acted at least with reckless disregard of the law.[17]

So, unless FinCEN can prove that a particular company’s beneficial owners failed to file their BOI reports despite either knowing about, or in reckless disregard of, the new reporting requirement, the civil and criminal penalties will not be an effective enforcement mechanism. It may be some time (if at all) before FinCEN’s outreach efforts are deemed to be so widespread that every company in existence on January 1, 2024 will be deemed to have sufficient knowledge about the BOI reporting requirement as to be subject to civil and/or criminal penalties for having willfully failed to comply with the requirement. At this point, that makes things very unclear as to what FinCEN will do after January 1, 2025, when far fewer than 32.6 million companies have filed their initial BOI reports.

[1] The CTA is codified at 31 U.S.C. § 5336.

[2] With regard to who is a “beneficial owner” of a reporting company, see, e.g., eMinutes, FinCEN Reporting — Yes It Is Really Happening (Feb. 23, 2023).

[3] FinCEN’s BOI reporting rule implementing the CTA is codified at 31 C.F.R. § 1010.380.

[4] See FinCEN, Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59,498, 59,500 & n.21 (Sept. 30, 2022).

[5] 31 C.F.R. § 1080(a)(1)(iii); FinCEN, Small Entity Compliance Guide v. 1.1, at 42 (Dec. 2023) [hereinafter “Small Entity Compliance Guide”]. See generally eMinutes, FinCEN Now Requires Reporting of Beneficial Ownership Information for All Companies that Had Any Existence On or After January 1, 2024 (July 11, 2024).

[6] See FinCEN, BOI Newsroom.

[7] See FinCEN, Beneficial Ownership Information – Café Conversations (Aug. 7, 2024).

[8] See FinCEN, Monthly Roundup of Beneficial Ownership Reporting Outreach Activities and Preview of Upcoming Events (Aug. 23, 2024).

[9] See Maureen Leddy, Pushback Against Corporate Transparency Act Filing Requirements Continues (Thompson Reuters Aug. 14, 2024).

[10] See C-Span, Treasury Secretary Yellen Testifies on International Financial System Soundness (July 9, 2024) (Rep. Nunn’s questioning begins at 1:22:54); see also Martha Waggoner, BOI Requirements Roll Along Despite Concerns About Too Little Outreach (Journal of Accountancy Aug. 6, 2024).

[11] Rep. Nunn commented that “[t]hat is an abysmal number, particularly when we have less than six months left in your timeline to help be able to execute.”

[12] See FinCEN, Beneficial Ownership Information Reporting Frequently Asked Questions (updated Oct. 3, 2024) [hereinafter “FAQs”], FAQ K.1, at 45-46 (“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.”).

[13] See FinCEN, Small Entity Compliance Guide, supra note 5, at 15; FinCEN, FAQs, supra note 12, FAQ K.2, at 46.

[14] 31 U.S.C. § 5336(h)(1); see also 31 C.F.R. § 1010.380(g). FinCEN’s rule implementing the CTA clarifies that a person fails to report complete or updated BOI to FinCEN if, with respect to an entity, (i) the entity is required to report BOI to FinCEN under the CTA; (ii) the reporting company fails to report the BOI; and (iii) the person either caused the failure or is a senior officer of the company at the time of the failure. 31 C.F.R. § 1010.380(g)(4).

[15] 31 U.S.C. § 5336(h)(3)(A). With inflation, the maximum $500 per day civil penalty was up to $591 as of April of 2024. See FinCEN, FAQs, supra note 12, FAQ K.2, at 46.

[16] Bryan v. United States, 524 U.S. 184, 196 (1998).

[17] See Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57-58 (2007).