Blog Series: What is the Penalty for Noncompliance with the Corporate Transparency Act?
Posted on 11/17/2023 at 01:43 PM by Charles Telk
On January 1, 2024, the Corporate Transparency Act will require millions of U.S. companies to file first-time beneficial ownership information reports with the U.S. Department of Treasury Financial Crimes Enforcement Network. For the next several weeks, Dickinson Law will cover some of the most significant reporting obligations as well as what businesses, financial institutions, and existing entities need to know about the changes.
The Corporate Transparency Act (2021) (the “Act”) requires reporting companies to file reports with the Financial Crimes Enforcement Network (FinCEN) identifying the company’s beneficial owners and company applicants starting on January 1, 2024. Reports must be filed using FinCEN’s electronic filing system. Failure to comply with either reporting obligation could lead to both civil and/or criminal penalties.
FinCEN’s final rules state that the reporting company itself has ultimate responsibility for filing beneficial ownership information (BOI) reports. An individual must make the filing, and any individual who files a BOI must certify the report on the company’s behalf.
Whoever files the reports has an incentive to make honest and accurate statements, and to do so on a timely basis. The Act imposes a daily fine of $500 on anyone who provides false or fraudulent information within a BOI report, up to a $10,000 maximum. The same penalty applies for willfully failing to report or update a BOI report.
In addition to monetary civil fines, such willful conduct could potentially result in criminal penalties, as well. Willfully providing false or fraudulent information on a BOI report, or willfully failing to make or update a report, could be criminally penalized by up to two years of imprisonment. Though reporting companies themselves have ultimate responsibility for BOI reports, the individuals who cause noncompliant reports to be filed will likely be the focus of criminal actions.
While such penalties may seem harsh for what is likely the first time many reporting companies will be subject to this type of reporting, it is important to note that the penalties imposed only apply to willful conduct. That is, the Act does not provide any penalties for negligent or non-willful conduct, which would include mistakes or human error. However, reporting companies can avoid these penalties altogether by simply complying with the reporting obligations and establishing controls to ensure any BOI reports filed are done so accurately.
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