Mar 263 min read

BOI Reporting: What You Need to Know

Updated: Oct 28

Are you aware of the recent regulatory changes impacting certain types of businesses in the United States? Staying ahead of regulatory changes is not just wise; it's essential. The Beneficial Ownership Information (BOI) Reporting requirements are a case in point.

What is Beneficial Ownership Information Reporting?

BOI Reporting is now a requirement for certain types of corporations created in or registered to do business in the United States. This regulation peels back the layers of corporate anonymity to make corporate ownership more transparent, preventing illegal activities like money laundering and terrorism financing.

The Corporate Transparency Act (CTA) authorizes FinCEN to collect and disclose this information to authorized government authorities and financial institutions, subject to adequate safeguards and controls. The CTA is part of the Anti-Money Laundering Act of 2020 (AML Act).

Who Needs to Comply with FinCEN BOI?

If you run a corporation or LLC in the U.S., this regulation might apply to you. However, there are exemptions. The CTA outlines 23 entity types, from banks to investment companies, that are off the hook because of their existing regulatory oversight.

For those in the mortgage sector, understanding these exemptions is critical to determining whether you're in the reporting line of sight.

Types of Companies Excluded from BOI Reporting

The CTA specifically excludes 23 types of companies from reporting:

In addition, organizations that fall into the “large operating company” category are exempt from reporting. The three criteria for an entity to be considered a large operating company are:

Has more than 20 full-time employees in the US: A full-time employee works at least 30 hours per week or 130 hours per month, as defined by the IRS.
Reported sales over $5M last year: Your business needs to have filed U.S. income tax returns showing more than $5 million in gross receipts or sales for the previous year.
Operates from a physical location in the US: Your business must have its own physical office space in the United States. This space can't be someone's home or shared with unaffiliated businesses.

Your BOI Compliance Checklist

Non-compliance with BOI regulations could lead to financial penalties or legal consequences, especially for providing false information or attempting to evade registration.

For entities not exempt, here's a rundown of what you need to do:

New companies formed after January 1, 2024, need to comply within 30 days of their creation.
Existing companies established before January 1, 2024, must comply by January 1, 2025.
Report detailed information about your company and significant owners (those with over 25% ownership or substantial control) to FinCEN.
Keep your ownership info up to date with FinCEN.

Businesses, including mortgage lenders, must assess whether these regulations apply to them and ensure they're prepared to comply. This might involve adjusting your processes for verifying customer backgrounds during loan applications and updating internal policies to reflect these new requirements. Training staff on these regulations is also crucial.

Going Beyond the Basics

Regardless of whether your company is required to register with FinCEN, it's also crucial for lenders to consider the following steps:

Integrate BOI for customer checks: Use the BOI system in your loan application checks. This applies when dealing with businesses or individuals linked to businesses as borrowers or in other roles.
Use BOI to check vendors: Integrate the FinCEN BOI system into your checks to ensure that all your vendors meet compliance standards.
Include BOI registration proof: For dealings with Third-Party Originators (TPOs) and Correspondents, be ready to show your registration, where needed.
Apply BOI checks in hiring: Use BOI due diligence when hiring. This is especially important for candidates linked to legal entities or businesses.
Update your compliance policy: Ensure your Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Policy reflects the latest BOI reporting requirements, ensuring your whole team is on the same page.
Train your team: Provide detailed training to your staff on BOI reporting. They should understand how it affects loan application checks and other due diligence processes.
Enhance quality control: Include checks for BOI reporting accuracy and completeness in your loan review process (QC).

Navigate FinCEN BOI Reporting with Loan Risk Advisors

As the mortgage industry adapts to regulatory changes, staying informed and proactive cannot be overstated. With the proper guidance and tools, adapting to BOI Reporting can be another step toward ensuring your business meets regulatory standards and thrives in an increasingly transparent financial landscape.

Loan Risk Advisors guides mortgage banks through regulatory changes like the Beneficial Ownership Information Reporting requirement. We offer tailored consulting services to ensure your business stays compliant while optimizing efficiency.

Don't let regulatory challenges hinder your success. Stay informed, stay compliant, and let's continue to build a more transparent, secure mortgage industry together.