FinCEN BOI Reporting: A Crypto Business Guide

Increased pressure due to more stringent regulatory requirements is felt by businesses in the United States. To combat financial crimes and improve transparency, the FinCEN Beneficial Ownership Information (BOI) reporting, under The Corporate Transparency Act (CTA), requires businesses to disclose ownership information.

Read this article to learn more about the essentials of BOI reporting, how it applies to crypto companies and the practical steps needed to prepare.

1. Who Must File BOI Reports?

The Financial Crimes Enforcement Network (FinCEN) requires most U.S.-based businesses to submit BOI reports.

A reporting company includes:

Domestic Entities - Corporations, limited liability companies (LLCs), and other similar entities created by filing documents with a secretary of state or similar office.

Foreign Entities - Businesses formed under foreign laws but registered to do business in the U.S. by filing documents with a secretary of state or similar office.

Exempt Entities

Certain businesses are exempt from filing, including:

01. Publicly traded companies,

02. Financial institutions already subject to federal oversight, and

03. Large operating companies meeting all three criteria:

• 20+ full-time employees in the U.S,
• Over $5 million in gross receipts or sales annually, and
• A physical operating presence in the U.S.

Due to their smaller size, emerging status, or decentralized nature, most crypto businesses usually aren’t exempted. Utilizing crypto accounting services can help businesses stay compliant while managing these requirements efficiently.

2. What Is a Beneficial Owner?

A beneficial owner is defined as an individual who meets either or both of the following criteria:

Ownership

People directly or indirectly holding 25% or more of the entity’s ownership interest.

Control

Persons exercising substantial influence over the company. CEOs, CFOs, or anyone who holds significant power in directing major business decisions.

3. What Information Must Be Reported?

Businesses must disclose the following:

1. Company Information

• Legal name,
• Trade name (if applicable),
• Primary U.S. business address,
• State or jurisdiction of formation, and
• Employer Identification Number (EIN)

2. Beneficial Owner Information

• Full name,
• Date of birth,
• Residential address, and
• A valid government-issued ID (e.g., driver’s license or passport).

3. Company Applicant Information

Required for entities formed after January 1, 2024, to identify the individuals filing incorporation documents.

4. Reporting Deadlines and Updates

BOI reporting deadlines depend on when the company was formed:

1. Companies Registered before January 1, 2024 - File by January 1, 2025.
2. Companies Registered from January 1, 2024 to December 31, 2024 - File within 90 days of formation.
3. Companies Registered after December 31, 2024 - File within 30 days of formation.
4. Updates to Ownership - New beneficial owners, address updates, corrections or any other changes, must be reported within 30 days after discovery.

Penalties for failure to comply can go up to $500 per day, with criminal fines possibly up to $10,000 and imprisonment for up to two years.

5. How to Submit Your BOI Report

1. Create a FinCEN Account

Register on FinCEN’s BOI E-Filing portal to access the reporting system.

2. Prepare Your Information

Upload a completed PDF or fill out the BOI form directly online using information gathered about the company, beneficial owners, and company applicants (if applicable).

3. File Your BOI Report Electronically

Submit all reports through FinCEN’s secure e-filing system. Paper submissions are not accepted.

4. Download Your Submission Record

To ensure compliance after filing, save a copy of the BOIR transcript for your records.

5. Update Your Report as Needed

New ownership address updates, corrections or any other changes, must be filed in an updated report within 30 days after discovery to maintain accuracy and compliance.

6. Considerations for DAOs with U.S. Presence

Decentralized Autonomous Organizations (DAOs) operating in the U.S. through a subsidiary should also be aware of BOI reporting. While the reporting focuses on the subsidiary registered in the U.S., cross-jurisdictional DAOs must still ensure compliance through disclosing the beneficial owners meeting FinCEN’s criteria, such as holding 25% or more in equity or exercising substantial control over the subsidiary.

Focusing on the subsidiary’s specific ownership structure, as outlined in the operating agreement, simplifies reporting for DAOs. However, since this is still a new law, staying updated for more FinCEN guidance is key for more clarity.

7. How Crypto Companies Can Prepare

1. Evaluate Obligations

Using the FinCEN rules, determine if your business is required to report.

2. Identify Beneficial Owners

Identify individuals or entities having 25% or more ownership or exercising substantial control.

3. Document Governance Frameworks

Ensure detailed record keeping of ownership tables, voting rights, operating agreements, and roles with substantial control.

4. Gather Required Information

Required documents such as IDs and proof of address of beneficial owners should be safely collected and stored.

5. Leverage Compliance Systems

KYC/AML processes can be integrated with BOI reporting requirements for streamlined compliance. Partnering with crypto accounting services can simplify record-keeping and ensure all regulatory obligations are met accurately.

6. Monitor Regulatory Changes

Be on the lookout for FinCEN guidance and amendments relevant to the crypto industry.

8. The Importance of Compliance

As crypto businesses aim to enhance trust with regulators and stakeholders, meeting BOI reporting requirements will demonstrate commitment to accountability and transparency. Additionally, to be a responsible leader in innovation, compliance paves the way for sustainable growth in a regulated environment. Also, non-compliance risks not only reputational damage but also severe penalties.

To help navigate complex regulations, consider engaging with experts. Professional guidance in FinCEN rules and building governance systems fit to your organization will make a significant difference. Crypto accounting services play a vital role in ensuring these compliance measures are seamlessly executed.

9. Consult with Experts

Need help navigating the new digital asset tax regulations? We stand as your vigilant financial co-pilot, ensuring compliance and peace of mind. Book a free consultation today at Onchain Accounting and stay ahead in the crypto landscape!

Disclaimer: No financial, tax, legal advice or opinion is given through this post. All information provided is for educational purposes only and may not apply to your specific situation.