Major Privacy Update: FinCEN's Beneficial Ownership Reporting Requirement Delayed
Court temporarily halts FinCEN’s reporting requirements in win for privacy
Starting earlier this year on January 1, 2024, the Corporate Transparency Act (CTA) implemented a new requirement for many United States businesses to start reporting the beneficial ownership information (BOI) of their corporate entities to the Financial Crimes Enforcement Network (FinCEN). In other words, you had to start providing detailed information of people (or entities) with an ownership interest in your company. Businesses created prior to January 1, 2024, had until December 31, 2024 to file their report.
For the procrastinators out there, ourselves included, your strategy worked out. In a somewhat surprise legal development, U.S. businesses are getting a temporary reprieve from the beneficial ownership reporting requirements.
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On December 3, 2024, a federal district court in Texas issued a nationwide preliminary injunction, pausing the CTA’s enforcement. This means companies are not currently required to file beneficial ownership information with FinCEN. At the same time, companies will not face liability for failing to comply while the order is in effect.
The injunction comes from the case Texas Top Cop Shop, Inc. v. Garland, where plaintiffs argued against the law’s implementation. The Department of Justice has already filed an appeal, but similar lawsuits challenging the CTA are still playing out in courts across the country. Some rulings in other districts have favored FinCEN, creating a patchwork of conflicting legal interpretations.
Until there is a final decision on the case, FinCEN has agreed to pause the BOI reporting requirement for all potential filers. Businesses can still voluntarily file their beneficial ownership reports. However, it may be worth waiting given the uncertainty surrounding the law’s future enforcement.
What’s at Stake?
The Corporate Transparency Act was designed to combat financial crimes like money laundering and terrorism financing by requiring businesses to disclose the names and identifying details of their beneficial owners. But the centralization of this sensitive information raises concerns about data security, privacy, and potential misuse by authorized parties. Data leaks by government employees are sadly all too common.
Privacy-conscious business owners can use this opportunity to strategize how best to safeguard sensitive ownership data. Always check with a reputable lawyer, but there are ways to structure your corporate entities to comply with the CTA requirements but still shield personal information from the BOI reports. For instance, if you’ve looked at the form, you may of noted that you can list another legal entity as the owner of the entity that you’re filling out the BOI form for. IYKYK.
As the legal challenges continue, the ultimate fate of the CTA remains uncertain. If we had to bet, we would bet the law ultimately gets upheld and goes into effect. But stranger things have happened.
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Disclaimer: None of the above is to be deemed legal advice of any kind. These are *opinions* written by a privacy attorney with 15+ years of working for, with and against Big Tech and Big Data. And this post is for informational purposes only and is not intended for use in furtherance of any unlawful activity.
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Oooh, I'll take this win for sure. I'm thinking the same thing though, that it's probably going to be upheld 😒, but I'm hoping not. Keeping my hopes up though.