Earlier this year, a new federal law went into effect, requiring many businesses to disclose information about their owners and report it to the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN. Once filed, the information then goes into the Beneficial Ownership Information Database.
The idea behind this requirement is to fight crime, but critics say it is putting an unnecessary burden on businesses.
Anti-money laundering
The beneficial ownership information requirement stems from the Anti-Money Laundering Act of 2020.
Money laundering is a practice in which money from illegal operations is concealed by moving it through transactions that appear to be legitimate on the surface. Money laundering has been illegal for many years, but law enforcement agencies say that criminal enterprises were able to get away with it by concealing their operations through complex systems of corporate ownership.
Among other things, the Anti-Money Laundering Act, along with a related law known as the U.S. Corporate Transparency Act, set up new systems to make it harder for criminals to disguise their operations. This is where the Beneficial Ownership Information Database (BOI) comes in.
The idea is for businesspeople to reveal the individuals and business entities who are profiting from a business, so that law enforcement can more easily detect money laundering and other illegal operations. All covered business entities must now reveal names, birth dates, addresses and other information about their owners.
Criticisms
The BOI Database may indeed help law enforcement, but it is also available to the general public. Critics of the new requirement have said that FinCEN is not doing enough to protect the private contact information revealed in these mandatory disclosures. In fact, they say some business owners have been targeted by scammers who obtained their contact information through the BOI Database.
Other critics say the requirements add a burden to those who are setting up new businesses. Some say the cost of these requirements to new U.S. businesses could total $200 million per year.
Some companies have challenged the requirements in court, but for the time being, the requirements still stand. Even so, some analysts say that since the requirements went into effect earlier this year, only a small fraction of businesses have completed their BOI disclosures.
