Small businesses, it’s time to prepare for new FinCEN law

By U.S. Rep. Blaine Luetkemeyer
R-Missouri

Washington, D.C. – We all learn in school that Congress writes law, the Supreme Court interprets law, and the Executive Branch implements law. Generally, as part of the implementation, we expect federal agencies to educate stakeholders on the details and implications of regulations. 

Otherwise, how could you expect people to comply if they never knew about the rule changes in the first place?

On Jan. 1, the Financial Crimes Enforcement Network (FinCEN) issued a new regulation that affects every small business in this country, but only a small percentage of them seem to know about it. If you or your friends work for or own a small business, please share this information.

Congress passed a law to crack down on money laundering schemes fueling drug smuggling, human trafficking, and illicit activity from hostile foreign entities. Known as the Corporate Transparency Act, the law requires businesses to simply disclose who owns the company to FinCEN, preventing shell corporations from flying under the radar.

Unfortunately, FinCEN has fumbled the roll out of the new rule, making little effort to reach small businesses and educate them on what’s required. Businesses have one year to comply with the rule, but again if you don’t know about it, you can’t comply.  

Who needs to report their ownership?

• Domestic reporting companies, which are defined as corporations, limited liability companies (LLCs), and any other entities registered with a secretary of state or any similar office in the United States.

• Foreign reporting companies, which are entities (including corporations and LLCs) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

• A reporting company created or registered to do business before Jan. 1, 2024, will have until Jan. 1, 2025, to file its initial beneficial ownership information report.

• Anyone the reporting company authorizes to act on its behalf – such as an employee, owner, or third-party service provider – may file a report on the company’s behalf.

What needs to be reported?

• Affected businesses will report identification information for the entity, like its official name and address, as well as its owner(s) – similar to the information collected when getting a driver’s license.

• This isn’t an annual requirement. Businesses just submit the initial report and update it whenever changes occur.

Is anyone exempt?

• Yes, 23 types of entities are exempt from the beneficial ownership information reporting requirements, including publicly traded companies that have already reported this information to the Securities Exchange Commission and other federal agencies.

• You can check out this list my staff and I put together, but it’s a good idea to read through FinCEN’s compliance guide for more details on the exemptions. 

Where can you report?

• You can access the filing system on FinCEN’s website using this link https://boiefiling.fincen.gov

• We worked to ensure there was no fee for submitting a report.

No one likes more paperwork, and I’ve had many fights in Congress to spare hardworking people from having more and more government red tape dumped on them. If done properly, this report shouldn’t take much time or effort. However, FinCEN’s failures have caused a great deal of confusion, and they’ve added more requirements than the law prescribed. It’s a frustrating reality of this administration.

Small businesses form the bedrock of our economy, and we must ensure good actors aren’t tripped up as we weed out the bad guys.