From the Editor: Bad actors vs. red tape
This editor has limited experience in money laundering.
What little experience there is comes from a few episodes of “Breaking Bad” and “Ozark.” (Recommend the first, not the second.)
So, I’m not qualified to address the potential for success of a plan that would have required small businesses to report various information about their “beneficial owners” to the Financial Crimes Enforcement Network (or FinCEN, an agency of the Treasury Department). How this rule might have protected America is unclear to me and beyond the scope of this column. (Will money launderers, bad actors and Russian oligarchs please identify yourselves?)
You probably have heard about this plan — the Beneficial Ownership Information Reporting Rule (BOI), which was born out of the Corporate Transparency Act of 2021. FinCEN says: “Filing is simple, secure, and free of charge.”
Thanks to a flurry of rulings and court orders, small businesses have been spared any enforcement of the rule. For now, at least.
What’s the big deal?
Well, I know very little about law enforcement, but I consider myself an expert on “simple.” And this filing process seems the opposite of simple.
The Frequently Asked Questions section of the BOI website runs for 59 pages. And it gets complicated very quickly. The questions and answers touch on spouses, trusts, Indian Tribes, foreign entities and the definition of “substantial control.”
The FinCEN explainer runs through 35 frequently asked questions before the reader even gets to the basic: “Who is a beneficial owner of a reporting company?”
Here’s a question typical of the literature: “What information should a reporting company report about a beneficial owner who holds their ownership interests in the reporting company through multiple exempt entities?”
The gulf between “simple” and this 59-page document would be comical if not for the answer to question K.2, which explains:
“As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of publication of this FAQ, this amount is $591.”
(Very kind of the FinCEN to calculate the inflation-adjusted fine for us. The answer continues:)
“A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.”
That seems harsh, even by “Ozark” standards.
From the Editor commends the National Lumber & Building Material Dealers Association and other industry groups for their strenuous opposition to the BOI rule.
And if you’ve seen regulations that threaten your business, let us know.
