Business owners in the U.S. need to become familiar with the Financial Crimes Enforcement Network, or “FinCEN”. The Corporate Transparency Act (CTA) requires businesses set up as LLCs and corporations to file Beneficial Ownership Information Reports (BOIR) with FinCEN to avoid penalties.
But who exactly is FinCEN, and what role do they play in small business compliance? In this article, we cover who FinCEN is, what they do, and how they impact your business.
Who Is FinCEN?
The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of Treasury. FinCEN’s primary mission is to investigate and prevent serious financial crimes, including money laundering and terrorism financing.
What Does FinCEN Do?
FinCEN fights financial crime by collaborating with banks and financial institutions to monitor financial transactions. FinCEN acts as the nation’s hub for gathering, analyzing, and distributing information on illegal financial activity.
FinCEN’s key duties include:
- Analyzing reports of financial transactions;
- Providing financial intelligence to law enforcement and regulatory agencies;
- Managing anti-money laundering initiatives, like the Bank Secrecy Act (BSA);
- Implementing financial sanctions set by the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC); and
- Gathering beneficial ownership information from U.S. businesses and enforcing BOIR.
FinCEN reviews over 2 million reports from banks and financial institutions each year. These include things like:
- Suspicious Activity Reports (SARS),
- Reports of Foreign Bank and Financial Accounts (FBAR), and
- Currency Transaction Reports.
The Corporate Transparency Act recently introduced a new responsibility for FinCEN: collecting Beneficial Ownership Information (BOI) Reports from U.S. businesses.
What Is Beneficial Ownership Information Reporting (BOIR)?
Beneficial Ownership Information Reporting, or “BOIR”, is a federal legal requirement for businesses entities formed in the U.S. The Corporate Transparency Act (CTA) introduced BOIR in 2024.
The CTA requires nearly all business entities in the U.S. to submit Beneficial Ownership Information Reports to FinCEN. These reports disclose details about the significant individuals involved with the company, including beneficial owners and company applicants.
The majority of LLCs and corporations in the U.S. qualify as “reporting companies” and must comply with the CTA to avoid penalties. Foreign companies registered to do business in the U.S. also count as reporting companies and need to complete BOIR.
Reporting companies need to submit their Initial BOI Reports to FinCEN by certain deadlines to comply with the CTA. Reporting companies are also required to keep their information up-to-date and inform FinCEN of any changes.
What Is FinCEN’s Role in BOIR?
FinCEN’s role in Beneficial Ownership Information Reporting has three parts:
1) Collecting BOI Reports from U.S. Companies
FinCEN oversees the development and upkeep of the BOI E-Filing system, the online platform that allows business owners to directly submit BOI Reports to FinCEN.
Moreover, FinCEN allows third-party filing services, like CTAboi.com, to submit BOI Reports for businesses.
2) Maintaining the BOI Database
The Corporate Transparency Act tasks FinCEN with collecting beneficial ownership information and securely storing it within a government database. Basically, FinCEN is creating a registry of beneficial owners connected to U.S. businesses.
Access to FinCEN’s BOI database is restricted; it is not available to the public. Only law enforcement agencies and banks can access the database to aid investigations and customer due diligence processes.
3) Enforcing the BOIR Requirements
FinCEN takes on the responsibility of enforcing the BOIR requirements. This involves ensuring that BOI Reports are filled out correctly and imposing penalties on companies that fail to meet the compliance requirements.
Who Can Access Beneficial Ownership Information?
Company beneficial ownership information is not open to the public. Law enforcement agencies and banks have strictly limited access to FinCEN’s BOIR database, but only under specific conditions.
Law enforcement officials may access beneficial ownership information to support investigations into potential financial crimes. Their access to the BOIR database is restricted, and they must submit formal requests to FinCEN to access a company’s BOI Report.
Banks and financial institutions also have access to BOIR data, helping them comply with Know Your Customer (KYC) regulations when opening new accounts. However, banks must first obtain consent from the reporting company before viewing the company’s BOI Report.
Is FinCEN the IRS?
No, FinCEN is not part of the U.S. Internal Revenue Service (IRS). These two agencies are both part of the U.S. Department of Treasury. However, the IRS and FinCEN are separate organizations, each with their own funding and goals.
FinCEN’s goal is to protect the global financial system by identifying and preventing financial crimes. They focus on analyzing financial transactions and collecting financial intelligence, playing a pivotal role in combating money laundering, terrorism financing, and other illicit activities.
The Internal Revenue Service (IRS) primarily handles the collection of taxes and the enforcement of tax laws in the United States. They manage different types of federal taxation, like income, corporate, and payroll taxes, and are tasked with ensuring tax compliance, processing tax returns, issuing refunds, and conducting audits.
The IRS and FinCEN do often work together to conduct investigations, however, their primary missions differ significantly.