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  • Writer's pictureYoshi from Comply

The FinCEN has recently released a Small Entity Compliance

The Financial Crimes Enforcement Network (FinCEN) has recently released a Small Entity Compliance Guide, commonly referred to as the "Guide," for reporting beneficial ownership information (BOI) in accordance with the Corporate Transparency Act (CTA). Additionally, FinCEN has updated its Frequently Asked Questions (FAQs) to assist with CTA compliance.


The Guide comprises six chapters along with an appendix and spans a total of 56 pages. It is primarily designed to aid small businesses facing relatively uncomplicated challenges under the CTA. Notably, the Guide is characterized by its straightforward language and incorporates informative infographics to enhance comprehension. Nevertheless, it's essential to note that the Guide and the revised FAQs do not offer novel insights into deciphering the BOI reporting regulations. Instead, they reiterate the existing BOI regulatory requirements, leaving those seeking a deeper understanding of nuanced CTA issues somewhat unsatisfied.


The CTA is scheduled to take effect on January 1, 2024. On this date, FinCEN is expected to have a fully functional database capable of receiving a substantial volume of reports from newly-formed companies obligated to report BOI under the CTA. Additionally, existing reporting companies must submit their BOI by January 1, 2025. This presents a formidable logistical challenge, given FinCEN's estimate of over 30 million entities requiring registration by 2025. Notably, the Guide firmly asserts the feasibility of the January 1, 2024 deadline and the operational status of the CTA BOI database at that time.


However, the veracity of this claim remains subject to debate. FinCEN must still issue critical and foundational regulations to implement the CTA, including finalizing rules pertaining to database access and proposing amendments, potentially substantial ones, to align the existing Customer Due Diligence (CDD) Rule, applicable to banks and financial institutions, with the distinct and often broader requirements of the CTA. Furthermore, FinCEN's initial proposal for the collection and reporting of BOI encountered significant criticism, leading to its revision.


Similarly, on June 7, 2023, four members of the U.S. House of Representatives, including the Chairs of the House Committee on Financial Services, the House Committee on Small Business, the House Subcommittee on National Security, Illicit Finance, and International Financial Institutions, and the House Subcommittee on Financial Services and General Government, sent a letter addressed to Janet Yellen, Secretary of the Treasury, and Himamauli Das, Former Acting Director of FinCEN, concerning the status of CTA implementation. The letter emphasizes the need for transparency from FinCEN and suggests that the January 1, 2024 deadline may not be achievable.


It is noteworthy that FinCEN allocated its limited resources to create a 56-page document that essentially reiterates existing regulatory requirements for BOI reporting. This decision appears unusual in light of FinCEN's numerous other pressing obligations, such as finalizing the remaining CTA regulations. However, it is plausible that the Guide was developed in response to demands from certain members of Congress who advocate for increased clarity for affected businesses.


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