From 1 January 2024, Irish companies that have an entity registered to do business in the US will need to report beneficial ownership details to the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (FinCEN).
This requirement was introduced under the U.S. Corporate Transparency Act 2020 (the Act). The Act was introduced to combat money laundering, tax fraud and other illicit activity. A reporting company includes a corporation, limited liability partnership, or other entity formed under the law of a foreign jurisdiction that is registered to do business in a U.S. state as a result of the filing of a document with the secretary of state or a similar office. However, certain entities are exempt from the reporting requirements, including publicly traded companies, banks, credit unions, money services businesses, investment companies or investment advisers, venture capital fund advisers and insurance companies.
Who is a beneficial owner?
For the purpose of the Act, a beneficial owner of a company is an individual who directly or indirectly,
- owns or controls at least 25% of the ownership interests of the company; or
- exercises substantial control over the company (e.g. senior officers of a company which would include the CEO, CFO or general counsel).
What information needs to be filed?
The amount of information that will need to be filed depends on when the company registered to do business in the U.S. If the company was created or registered after 1 January 2024, it needs to report information about itself, its beneficial owners and its company applicants (the individual who files the document that registers the company). Otherwise, a company registered before 1 January 2024 will only need to report information about itself and its beneficial owners.
Companies within the remit of the Act will need to report beneficial ownership information electronically via FinCEN’s website. The relevant form will be available on FinCEN’s website and it will be possible to submit information after 1 January 2024.
Existing companies that fall within the scope of the Act need to provide beneficial ownership information to FinCEN by 1 January 2025. Companies created on or after 1 January 2024 will need to file information with FinCEN within 30 calendar days of the incorporation of the company. If the beneficial ownership of an entity changes, such changes need to be reported to FinCEN within 30 days from the date of the change.
Reporting violations can give rise to civil and criminal penalties. The Act provides that willful failure to report complete beneficial ownership information or providing false information can result in a civil penalty of $500 per day and if there is continued breach, a fine of up to $10,000. There are also criminal penalties of imprisonment of up to 2 years.
Who can access the beneficial ownership information?
The beneficial ownership information will not be publicly available and will only be available to authorised government authorities including:
- Federal law enforcement, national security or intelligence agencies;
- State and local enforcement;
- Foreign law enforcement and national security agencies;
- Financial institutions (in certain circumstances); and
- Treasury office.
As these reporting obligations come into effect on 1 January 2024, steps should be taken to identify companies that potentially fall within the scope of the Act, determine whether an exemption applies and if not, collate details on the beneficial owners and seek legal advice in advance of the reporting deadlines.
For further details, please contact a member of our Corporate / M&A Department.
Contributed by Caroline Corcoran