On October 3, 2024, the Financial Crimes Enforcement Network (FinCEN) issued new guidance concerning the Corporate Transparency Act (CTA) by updating and expanding on the Beneficial Ownership Information (BOI) Reporting Frequently Asked Questions (FAQs) that Seyfarth's CTA Task Force has covered in the past. Key updates include clarifications on who can access and submit BOI, the use of third-party service providers, exemptions for certain entities, the creation and conversion of reporting companies, and acceptable forms of identification for beneficial owners and company applicants.
Access to BOI and How BOI is Stored
FinCEN may permit access to BOI to federal agencies, state, local, and tribal law enforcement with court authorization, officials at the Department of the Treasury, as well as certain foreign law enforcement authorities under certain conditions. Financial institutions and regulatory agencies that supervise or assess financial institutions may also be permitted to access BOI to comply with customer due diligence requirements under applicable law. Notably, FinCEN clarified that BOI is exempt from disclosure under the Freedom of Information Act (FOIA).
FinCEN emphasized the importance of maintaining the confidentiality and security of BOI, which is stored in a secure, non-public database using information security methods and controls typically used in the Federal government to protect non-classified, yet sensitive information. FinCEN indicated they will continue to work closely with those authorized to access BOI to ensure it is used only for authorized purposes and handled in a way that protects its security and confidentiality.
Submitting BOI and Use of Third-Party Service Providers
The updated FAQs clarified who can assist in BOI submission. Reporting companies can authorize employees, owners, or third-party service providers to file BOI reports on their behalf. When submitting the BOI report, individual filers should be prepared to provide basic contact information about themselves, including their name and email address. Any person filing the report, including a third-party service provider, must certify that the information submitted is true, correct, and complete.
Reporting Company Creation and Conversion
The FAQs clarify that reporting companies are created (or, if a foreign company, registered to do business) in the United States by filing a document with a secretary of state or a “similar office.” A “similar office” includes any office of a governmental authority under the law of a State or Indian Tribe where a domestic entity files a document to be created or a foreign entity files a document to be registered to do business in the United States. Federal agencies are not considered “similar offices.”
Additionally, the FAQs address whether a conversion from one corporate type to another (e.g., LLC to corporation) creates a new domestic reporting company that must file an initial BOI report. Depending on the law of the State or Indian Tribe and the type of entity undergoing conversion, a conversion filing may result in the creation of a new domestic reporting company, which would then be required to file an initial BOI report. Even if a conversion does not create a new domestic reporting company, an updated BOI report may be required if there are changes to previously submitted information, such as a name change or a change in the jurisdiction of formation.
Pooled Investment Vehicle Exemption
The updated FAQs clarify that the exemption for pooled investment vehicles (PIVs) from BOI reporting requirements applies only to PIVs operated or advised by certain entities. Specifically, this includes investment advisers registered with the SEC under the Investment Company Act of 1940 or the Investment Advisers Act of 1940. Exempt reporting advisers (ERAs) not registered with the SEC do not qualify.
However, PIVs are also exempt if operated or advised by a “venture capital fund adviser” that meets specific criteria under the Investment Advisers Act of 1940 and has filed the necessary forms with the SEC. PIVs operated by ERAs that meet these criteria are exempt from BOI reporting, while those relying on other exemptions from SEC registration are not.
Identification and Documentation
Additionally, the updated FAQs specify acceptable forms of identification for beneficial owners and company applicants, such as non-expired U.S. passport cards and state-issued identification documents. If a beneficial owner’s or company applicant’s identification document does not match their current full legal name due to a recent name change, they should report their current full legal name to FinCEN. They can use an identification document that does not yet reflect the updated name. This also applies when requesting a FinCEN identifier.
If the individual later obtains a new identification document with the updated name, address, or identifying number, they should update their information with FinCEN by filing an updated beneficial ownership information report or updating their FinCEN identifier information, including submitting an image of the new document.
These updates aim to enhance clarity and compliance with the BOI reporting requirements, ensuring that companies understand their obligations and the processes involved.
For more information on BOI reporting obligations under the Corporate Transparency Act, click here.
