BOI Reporting to FinCEN Vs Financial Institutions: Understanding the Basics

Understand the key differences in BOI reporting requirements for FinCEN and financial institutions.

BOI Reporting to FinCEN Vs Financial Institutions: Understanding the Basics

Starting in the 2024 tax year, the Corporate Transparency Act (CTA) mandates that most small businesses in the United States submit a Beneficial Ownership Information (BOI) report to FinCEN, a U.S. Department of the Treasury bureau. This BOI report provides crucial information about the individuals who own or control the reporting company (also known as beneficial owners). Additionally, financial institutions or banks must manage beneficial ownership information from certain customers seeking to open bank accounts as part of federal customer due diligence requirements.

The CTA requires entities to report information to FinCEN, which can share it with law enforcement, government agencies, and select financial institutions. These authorized parties use the data to combat money laundering and other illegal activities involving shell companies. Financial institutions are also required to collect beneficial ownership information to better understand their customers and prevent exploitation for illicit activities.
In this article, we will explore these two distinct requirements, the information needed by FinCEN and financial institutions, and the criteria for identifying beneficial owners.

Do Businesses Need to Provide BOI Reports to Both FinCEN and Financial Institutions?

Yes, the business must provide BOI reports to FinCEN and Financial Institutions. However, these entities collect information for different reasons and, in some cases, collect different types of information. If an entity is required to report beneficial ownership information to FinCEN, that requirement cannot be fulfilled by providing beneficial ownership information to financial institutions.

Let’s consider an example: if a business needs to open a bank account, the financial institution must collect information about the business’s beneficial owners as part of its federal customer due diligence obligations. The bank collects and manages this information, which is not connected with FinCEN and is also used to ensure compliance with anti-money laundering regulations.

On the other hand, the same business may also be considered a “reporting company” under the CTA, requiring it to file a BOI report directly to FinCEN. It’s important to note that reporting BOI to FinCEN is a separate obligation and cannot be fulfilled by simply providing this information to a financial institution. Each entity must ensure they meet both requirements independently, as the information collected by FinCEN and financial institutions serves different legal and regulatory purposes.

Do FinCEN and Financial Institutions Collect the Same Information?

No, FinCEN and financial institutions don’t collect the same type of beneficial ownership information. While their information is similar, some specific and essential requirements may differ.

For example, financial institutions are mandated to collect the Social Security numbers of beneficial owners as part of their due diligence process. This is crucial for meeting regulatory obligations, such as verifying the identity of the individuals involved in the business. However, regarding reporting to FinCEN, Social Security numbers are not required.

Let’s break down the different types of reporting requirements for both FinCEN and financial institutions in detail:

Information about Business

For FinCEN

• Name
• Any trade name or doing business as (DBA) name
• Address
• Jurisdiction of formation and registration (if foreign entity)
• Tax Identification Number

For Financial Institutions

• Name
• Entity type
• Address
• Tax Identification Number

Beneficial Owner Information

For FinCEN

• According to FinCEN, the beneficial owner is defined as any individual or entity who directly or indirectly:
• Exercise substantial control over the reporting company, or
• Owns or controls more than 25% of the ownership interest of a reporting company
• There is no limited number of beneficial owners to be reported to FinCEN.
• The information provided by the beneficial owners for the FinCEN, such as:
• Name
• Date of Birth
• Address
• Unique identifying number
• An image of an acceptable and valid identity document, such as a U.S. passport, state driver’s license, identification document issued by a State, local government, Indian Tribe, or foreign passport.

For Financial Institutions

• According to the Financial Institutions, the beneficial owner is classified as:
• Control Prong — A single individual, including an executive officer, senior manager, or any other individual who regularly performs similar functions, is responsible for controlling, managing, or directing a legal entity customer.
• Ownership Prong — Every individual, if any, the person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, owns 25% or more of the equity interests of a legal entity customer.
• Under the control prong, information is collected for only one individual. Under the ownership prong, information may be required for up to four individuals.
• The information provided by the beneficial owners for the Financial Institution collection, such as:
• Name
• Date of Birth
• Address
• Social Security Number
• A copy of the driver’s license or other identifying document for each beneficial owner.

Company Applicant Information

For FinCEN

• According to FinCEN, a company applicant must be the person responsible for filing the documents to register the company with the state secretary or a similar office. The company can have up to two individuals as company applicants.
• The information provided by the company applicant in the BOI report for FinCEN reporting, such as:
• Name
• Date of Birth
• Address
• Unique Identification Number
• An Image of the acceptable and valid identification document.

For Financial Institution.

• For this BOI report, there is no requirement to provide information about the company applicant. Instead, provide the details about the person who is opening the bank account.
• The information provided by the person for the financial institutions, such as
• Name
• Title

Other Information and Certifications

For FinCEN

• Certification by the individual filing the report with FinCEN that the report is accurate, correct, and complete.

For Financial Institutions

• Certification by the individual that the information is complete and accurate to the best of the individual’s knowledge.

Deadlines for Submitting BOI Reports

For FinCEN

The deadline to submit the BOI report depends on the company’s registration date. The deadline may be:

• Company registered or formed prior to January 1, 2024 — Submit the BOI report by January 1, 2025
• Company registered or formed on or after January 1, 2024 — Submit the BOI report within 90 days
• Company registered or formed on or after January 1, 2025 — Submit the BOI report within 30 days

For Financial Institutions

• There is no specific deadline for submitting the BOI report. However, when opening a bank account, you must provide the necessary BOI report details as required by the financial institution at the time of account opening.

The Bottom Line

In conclusion, businesses must meet separate BOI reporting requirements for FinCEN and financial institutions, each serving different regulatory purposes. Ensuring compliance with both can be challenging, but TaxBandits can simplify the process. TaxBandits provides efficient solutions for managing BOI reporting, helping businesses stay easily compliant. By choosing TaxBandits, you can streamline your reporting obligations and focus on what matters most for your business.