Closely held US entities and certain foreign companies doing business in the US will need to report information to the US Treasury (FinCen) regarding Beneficial Owners for holding or ‘shell’ companies, or companies with less than 20 employees. This legislation aims to deter money laundering, terrorist and other illicit activities, and permit international cooperation.
Framework and Reporting Frequency
Pending further regulation, reporting for existing entities will commence in 2022. New incorporations will start reporting beneficial ownership during 2021. Information will be collected, most likely electronically, by the Treasury (FinCen). We expect that the procedures will be similar to FBAR reporting.
Beneficial owners as defined in the Act
• Term implies looking up a chain of entities to beneficial owners of entity beneficial owners
• Means an individual who, directly or indirectly, through any contract, arrangement, understanding, relationships, or otherwise:
• Owns twenty five percent (25%) or more of the equity interests of the subject company (e.g., membership interest in an LLC or shares of a corporation)
• Exercises “substantial control” over the subject company
Who will be able to access the information?
• US federal law enforcement
• US government agencies at the request of foreign law enforcement
• No automatic exchange of information contemplated in the legislation.
What will be reported?
• Full legal name
• Date of birth
• Current residential or business address
• Unique identifying number from acceptable identification document (i.e., passport, government ID)
Penalties for noncompliance: reporting violations include $ 500 per day, up to $ 10,000, and up to two years imprisonment.
