Welcome to Cash in the Cyber Sheets. I'm your host, James Bowers, and together we'll work with business leaders and industry experts to dive into the misunderstood business of cybersecurity and compliance to learn how to start making money from being secure and compliant. Welcome to Cash in the Cyber Sheets.
Hey everyone, welcome back to Cash in the Cyber Sheets. I'm your host, James Bowers, Chief Security and Compliance Architect here at Input Output. Very happy to have you here with us today as we actually push aside what we're going to talk about to focus on some major changes with the FinCEN BOI beneficial ownership information reporting requirements. We're going to dive into what that is for those of you that haven't been following it, talk about what changed and really what's important. What that means for your business is it's pretty substantial. So before we jump in, please click that like, click that subscribe and follow us on whatever channel you're listening to us, whether it be Apple, Spotify, YouTube, and leave us some comments so that we can know what it is you'd like and what you would like to dive deeper into.
So with that said, FinCEN BOI, beneficial ownership reporting, I want to give a brief overview for those of you that haven't been following or probably those of you that have and let that information fall out of your brain because who wants to hold on to that. But the beneficial ownership information reporting is all part of the Corporate Transparency Act, and that came from the Anti-Money Laundering Act of 2020. In a nutshell, looking to put a lot of new legislation, rules, and processes in place to help fight money laundering.
Now, what the beneficial ownership information is, is part of that, is designed to identify anyone that has a substantial interest in a company or some other type of legal entity that could even be a trust, something like that. And what that substantial ownership means for interest is that you have 25% or more ownership or control of a legal entity. So that means if you have a business, let's say you set up an LLC or a piece of property that you purchased, let's say that you also have a trust for your, to put all of your assets into, that could be three different entities that you're a beneficial owner of and that you would have to report.
So, who's required to report? Well, there's a long list of exceptions. I'm going to just give it in a nutshell here, basically, if it was a very, very large company or a company that was covered under some other very strict review or legislation, like perhaps some FTC, certain FTC requirements or, my mind's just drawing a blank, but the financial side of things, SEC, that's the acronym. If under the SEC, a lot of those were exempt because they already had that oversight. Also certain non-profits and other types of entities were exempt, but for the most part, if you had any type of a business or legal entity that you owned 25% or more of or had an interest, a managing interest, control capability of 25% or more, you had to report. And let's see, what, the things that had to be reported, and here's where we start getting into why it's been going back and forth because, and again, for those of you that haven't been following it, the BOI reporting requirements, it's been required, then it fell off. Was required again, then it was required, required again, then not required. And it's been this ping-pong match between court battles and just a complete back and forth between really businesses saying that this is too much and it's not going to do anything and FinCEN saying, no, we have to do this. So what had to be reported in there was basically all of your information, your name, social, date of birth, picture/photo IDs, all of your business information, some asset information.
It was an incredible amount of information that was all being put into the FinCEN financial crimes database. So essentially, all of these business owners had done nothing wrong but had to provide all of their information to a criminal database just in case something comes up, it's already there. And where the big argument was is that a lot of this information's already available.
When you file for a tax ID number to start a business, you're giving all of that information to the Treasury Department anyway and to other state agencies, and all of this information's already out there. This was just creating another database that, one, was what a lot of people felt, a privacy overreach, two, it created a one-stop shop for a nice data breach, and what it also did is with all of these reporting requirements, they carried some pretty hefty fines, not only fines, but potential time in jail.
So where the argument was is that, it's a lot of information that the government already has. It's difficult to get in there and to remember to do the reporting for all of these different entities that I may have access to. And if I misstep, well, now I've got fines, potential prison time. It was just too much. So as far as any concerns about access to the beneficial information reports or all of that information that was being reported, it wasn't publicly available. It was only available for FinCEN and other government agencies. So it was there to support criminal investigations, to support other type of investigations, although even though other people aren't supposed to have access to it, that doesn't always stop everything. Okay so to help give an understanding, and I've actually had to cut and splice and redo this a few times, because even with the paper in front of me, it's very confusing as far as is required, not required.
Let's go through a little bit of this legal roller coaster of the FinCEN DOI. Now, originally, it was set to fully enforce for everybody on January 1st, 2025. That meant that if you had any entity created prior to that, you had to have all of your reporting information in by January 1st, 2025, and then if you created a company in 2025, you would have, I believe, 30 days to file your report. So not a long time.
On December 3rd, 2024, Eastern District of Texas, U.S. District Court issued an injunction against it based on legal battles that said that it is not required to report. So here we are, December 3rd, just not even a full month away from when it was required, and they're saying you don't have to do it. However, December 23rd, 2024, the Court of Appeals granted a stay of that injunction, meaning that, nope, you actually have to report.
Three days later, the Fifth Circuit Court vacated that stay, which then meant, okay, no, just kidding, you actually don't have to report. Then on December 31st, Department of Justice filed an application, and that actually made it required again. Now, at that point, they pushed back the reporting deadline a little bit to get some time, but just in 30 days, one, two, three, four, four flip flops.
Now, we get to January 7th, 2025, and they actually say that, nope, it's not required. There was another nationwide injunction. However, on February 18th, the Order of Appeal was completed, and it ultimately reinstated DOI. At that time, the reporting requirements were updated to be for March 21st, 2025, and that is actually what we had in our original blog post, what we had in our newsletter.
Now, March 2nd, the U.S. Treasury Department came out, and I actually want to read exactly what was in their press release, not the whole thing, but I think this is an important part.
"The Treasury Department is announcing today that with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the Beneficial Ownership Information Reporting Rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either."
So, Treasury Department came out and said, we don't care what it says, what is required. We're not going to enforce it at all right now, effectively making FinCEN DOI requirements not required for reporting. What's also interesting is they are discussing proposed rule making changes that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hardworking American taxpayers and small businesses, yada, yada, yada, and basically we're trying to make things easier for American businesses.
This is huge because this is FinCEN under the U.S. Treasury is saying that we're not going to enforce this, we're not going to require it, and eventually we're going to change it. Now, with that said, if you go to FinCEN.gov/DOI, it still states that the reporting requirements are required.
So, here's where I would definitely recommend working with your legal counsel to see what do you have to do and what don't you have to do to make sure you don't get in any type of legal issues. However, according to the Treasury, even if you do something you're not supposed to, they don't seem to care. They're not going to enforce it.
So, any of our information, any of the other information you see online, as of right now, the March 21st, 2025 deadline for DOI is halted. It is not required. If you want to, you can still report. You can still put all of your information in the FinCEN database. In that way, make sure that you're covered, or if you believe it's going to change again, which I can't imagine why it wouldn't, it only has changed like 52 times in the past 30 days, then you would already be ready. However, for those of you that felt like it was an overreach and way too much information, which for what it's worth, we definitely felt that way, especially since they already have the information, and I prefer to limit where our data's at, you don't need to report.
So, our recommendations going forward would definitely be continue to watch this on the FinCEN.gov/DOI website. Continue to watch this on the Treasury Department website. We will continue to provide updates as we get them. We'll continue to provide any information we have to help make this easier. Definitely work with your legal counsel to see what are your requirements and make sure that you're following all of your requirements appropriately. But, huge win, as of today, it doesn't look like FinCEN is going to require that DOI, and from some of the language, it seems like they might be getting rid of it entirely for domestic entities. So, that's all the time we have for today. Thanks for listening, and until next time.
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