US: FinCEN provides time estimates for compiling beneficial ownership details.

As published on journalofaccountancy.com, Monday 23 January, 2023.

Treasury's Financial Crimes Enforcement Network (FinCEN) has updated its estimates on how long it should take a company to report beneficial ownership information (BOI) to account for the complexity of the business structure. Filings for entities with complex structures could take nearly 11 hours, the agency estimates. It expects filings from 32.6 million entities in the first year.

The average burden of reporting BOI for reporting companies with simple beneficial ownership structures should be 90 minutes per response, FinCEN said.

In a notice and request for comment Jan. 17 in the Federal Register, FinCEN said it assumes that 59% of reporting companies will have a simple structure — one beneficial owner who also is the company applicant; 36.1% will have an intermediate structure of four beneficial owners and one company applicant; and 4.9% will have a complex structure, or eight beneficial owners and two company applicants.

Starting Jan. 1, 2024, most companies created in or registered to do business in the United States must report information about their beneficial owners to FinCEN as part of the Corporate Transparency Act (CTA). Information collected by FinCEN from the beneficial owner reports will be kept in a nonpublic database, the forthcoming "Beneficial Ownership Secure System."

FinCEN describes a company's beneficial owners as the persons "who ultimately own or control the reporting companies." Disclosing information about them will "help law enforcement and national security agencies prevent and combat money laundering, terrorist financing, tax fraud, and other illicit activity, as well as protect national security," FinCEN said in its Notice of Proposed Rulemaking (NPRM) issued in December.

The estimates are divided among time to: identify and collect information about beneficial owners and company applicants and time to fill out and file the report, including attaching an image of an acceptable identification document for each beneficial owner and company applicant.

The Federal Register notice set a deadline of March 20 for comments on the time estimates. The AICPA submitted comments to FinCEN in February 2022, urging it to consider the burden and cost imposed by BOI reporting requirements.

As first stated in its September 2022 regulatory impact analysis, FinCEN said it's difficult to estimate the number of entities that are reporting companies. It assumes that all entities created or registered before the effective date of Jan. 1, 2024, that are subject to the BOI reporting requirement will submit their initial BOI reports in the first year — or 32.6 million entities. In 2025 and beyond, FinCEN estimates that almost 5 million initial BOI reports will be filed — the same estimate as the number of new entities per year that meet the definition of a reporting company and are not exempt. The total five-year average of expected BOI initial reports is 10,510,160.

FinCEN estimates about 6.6 million BOI reports will be filed in 2024, and about 14.5 million such reports will be filed annually in 2025 and beyond. The total five-year average of expected BOI update reports is almost 12.9 million.

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