Related article: Do I need a FinCEN ID?
TRANSCRIPT
Greg Corombos: Our guest this week on Expert Insights is Sandra Feldman, Publications Attorney at CT Corporation, a Wolters Kluwer company. Sandra is here to tell us more about the Corporate Transparency Act and beneficial ownership information reporting. Today, she will tell us about how a FinCEN Identifier is used to provide the personal information that the Corporate Transparency Act requires to be reported to the Financial Crimes Enforcement Network, also known as FinCEN. And Sandra, it's great to have you with us again.
Sandra Feldman: Thank you, Greg. As you said, today, instead of talking in general about the requirements of the Corporate Transparency Act, or CTA, which I've done several times already, I'm going to talk about the FinCEN Identifier or FinCEN ID. And we chose that topic, because when you go to fill out your reporting company's initial beneficial ownership information (or BOI) report, whether you're using CT’s platform or FinCEN’s, in the sections where you have to provide the required personal information of your company's beneficial owners and company applicants, you'll see an option to provide a FinCEN Identifier. And we'd like to make sure everyone understands what that option is all about. So I'm going to talk about what a FinCEN Identifier is, how it's used, the pros and cons of obtaining a FinCEN Identifier, and how you can obtain one if you decide you want one.
Greg Corombos: Let's start where you started with [that] list of issues there. What is a FinCEN ID?
Sandra Feldman: It's a 12-digit number that the Financial Crimes Enforcement Network, better known as FinCEN, will issue to any individual or reporting company that requests one. Each FinCEN ID is unique to that individual or reporting company. And an individual or reporting company can only receive one FinCEN ID. Although both individuals and reporting companies can obtain a FinCEN ID, I'm going to talk mainly about the FinCEN ID that's obtained in use by individuals because a reporting company's FinCEN ID can only be used in one limited situation, that probably isn't that relevant to most of the people listening. However, if you want more information about the FinCEN ID a reporting company can request, we have some articles on our website about it.
Greg Corombos: And that website is ctcorporation.com. We'll mention it again at the end of our conversation today. Sandra, is obtaining a FinCEN ID required by the Corporate Transparency Act?
Sandra Feldman: No it isn’t. Obtaining a FinCEN ID is completely voluntary. And in fact, my goal was to make sure that the individuals who were beneficial owners or company applicants have all the information they need to make an informed decision about whether to obtain a FinCEN ID, considering that it is optional.
Greg Corombos: So how is an individual's FinCEN ID used if they get one?
Sandra Feldman: Well, to explain that I have to remind everyone what the CTA requires and why. The CTA was enacted because anonymous shell companies are using the United States financial system to commit financial crimes like money laundering and tax evasion. And in Congress's opinion, if there's a database containing the personal information of the individuals who actually own or control those companies, who are referred to in the CTA as beneficial owners, and the individuals who form those companies, who are called company applicants. And if law enforcement officials can access that personal information, it can help combat those financial crimes. So the CTA mandates FinCEN, which is a bureau in the Department of Treasury, to collect the personal information of every beneficial owner of every company that meets the definition of a reporting company. And for reporting companies formed or registered on or after January 1, 2024, FinCEN also has to collect the personal information of their company applicants, and FinCEN is directed to maintain that personal information in a secure BOI database and provide access to the information to authorized parties.
Greg Corombos: Sandra, this seems like a good spot to make sure we're all on the same page here. Could you remind us of what personal information has to be reported to FinCEN?
Sandra Feldman: Sure. For each beneficial owner or company applicant, it's their legal name, date of birth, residential address — except for company applicants who form or registered companies as part of their employment, who have to provide their business address — the number from an acceptable document (such as a driver's license, state or local ID, or passport), and an image of that document.
Greg Corombos: And how is that information then provided to FinCEN for its BOI database?
Sandra Feldman: There are two ways that this personal information can be provided to FinCEN. One way is if the beneficial owners and company applicants give each item of personal information to the reporting company, and the reporting company sets forth all that information in the BOI report that it has to file with FinCEN. The other way is if the beneficial owners and company applicants give their personal information directly to FinCEN by filing an application for a FinCEN Identifier. In that application, they set forth the required information. And once they submit their application, they will receive that 12-digit number that is their FinCEN ID. They can then give the reporting company that FinCEN ID, and the reporting company in its BOI report can set forth the FinCEN ID instead of each item of information for that particular individual.
Greg Corombos: Sandra, why would someone want to get a FinCEN Identifier, considering that they don't have to, the law doesn't require it?
Sandra Feldman: There are three main reasons. One is that it simplifies the reporting, particularly for someone who's a beneficial owner or company applicant for a lot of reporting companies. Instead of having to give their name, birthdate, address, copy of their driver's license or passport to a lot of companies, they only have to give that one 12-digit number. Second, there may be privacy concerns that people have. Take, for example, a company applicant, for whom filing formation documents is a purely ministerial task that's part of their job. They may not like the idea of giving their personal information to a company that they have no relationship with, and know very little about. Third, there may be security concerns. Some people may feel that FinCEN will be able to protect the personal information more securely than a small company that may not have the resources of FinCEN to have security measures in place to protect the personal information that's being collected.
Greg Corombos: Alright, so let me flip the question around then. Because obviously security and privacy are growing concerns in the business world and especially with sensitive information that's being required here by the CTA. So why would someone not want to get a FinCEN Identifier?
Sandra Feldman: Right now there's a big reason why someone may not want to apply for a FinCEN ID. A beneficial owner or company applicant who gets one is required to file an updated application within 30 days of any change in the information they reported. So if they change their name or address, or the number on their identifying document changes, they must update FinCEN. And there are penalties that can be imposed on them for failure to comply with the updating requirement. And the problem is that this updating obligation is ongoing, even after the individual is no longer a beneficial owner or company applicant. So theoretically, as it currently stands, if a beneficial owner obtains a FinCEN ID in 2024, gets divorced and changes her name in 2045, she has to remember to file an update with FinCEN in 2045 even if she stopped being a beneficial owner 20 years earlier.
Greg Corombos: Well, that is something that would not be top of mind in a situation like that. But is there a way to cancel or deactivate a FinCEN ID to end that updating obligation?
Sandra Feldman: Currently, there is not. But I should point out that FinCEN in an FAQ posted on its website, said that it is actively assessing options to allow individuals to deactivate a FinCEN Identifier so that they don't have that ongoing updating obligation. But I should also point out that this FAQ was posted in September of 2023. And since then, [it] has not yet provided that deactivation option.
Greg Corombos: So if someone does want a FinCEN ID, Sandra, how do they obtain one?
Sandra Feldman: To request the FinCEN ID for an individual, you have to either have a login.gov account, or if not, create one. Login.gov is a sign-on service that's used by a number of government agencies. And it's used to verify the identity of a person before they can access information on the agency's website. Once you have a login.gov account, you can go to FinCEN’s website, where you'll see the option to apply for a FinCEN ID. You sign on, login, give your email address and password, and you'll get to the application. And in the application, you provide the required personal information, attach the document image, certify that the information is true, complete, and correct, and hit “submit”. You'll get a “submission received from FinCEN” with a FinCEN ID. And there is no fee for applying for a FinCEN ID. To update the information you go to the same place you went to on FinCEN’s website for the initial application. You click on the “update” button, enter the updated information, and submit it to FinCEN. I should also mention that if you decide your reporting company should get a FinCEN ID, a reporting company requests one in its initial BOI report or thereafter in an updated BOI report. You'll see a box you can check to request the FinCEN ID, whether you're filling out the BOI report on CT’s platform or FinCEN’s or otherwise.
Greg Corombos: Well, Sandra, it's very important to understand what's required for compliance here, given that this is new to so many people. Any final thoughts on this subject?
Sandra Feldman: I should remind everyone that for reporting companies created before this year, the deadline for filing their initial BOI report is January 1, 2025. If they haven't started preparing yet, they may want to get started. Part of that preparation should be making sure that the beneficial owners are aware of and understand the FinCEN Identifier option. And I appreciate the opportunity to provide information about FinCEN Identifiers today.
Greg Corombos: Well, Sandra, as always, a ton of great information here and really, really important for people trying to understand how compliance works here and especially the pros and cons and what it means to have a FinCEN Identifier. Thanks so much for being with us today. As always.
Sandra Feldman: Thank you.
Greg Corombos: Sandra Feldman is Publications Attorney at CT Corporation, a Wolters Kluwer company. I'm Greg Corombos reporting for Expert Insights. For more information on this subject, please visit ctcorporation.com.
