The New BOI Reporting Requirements: What You Need to Know
The new rule by the Financial Crimes Enforcement Network (FinCEN) regarding Beneficial Ownership Information (BOI) reporting under the Corporate Transparency Act (CTA) has significant implications for CPA firms and their clients. Here are the key points:
Increased Workload and Compliance Costs: FinCEN estimates that the initial compliance efforts will be substantial, with millions of hours expected to be spent on BOI reporting. CPA firms will need to allocate significant time and resources to help clients meet these new requirements, potentially leading to increased operational costs for both firms and their clients (FinCEN) (Davis Polk).
Client Data Security: The CTA requires the collection of detailed personal information about beneficial owners, which means CPA firms must implement robust data security protocols to protect this sensitive information. This may involve upgrading existing systems and ensuring compliance with data protection standards similar to those required under the Gramm-Leach-Bliley Act (Davis Polk) (WK Expert Solutions).
Advisory Role Expansion: CPA firms will likely see an expansion in their advisory roles. FinCEN expects CPA firms to assist clients with BOI reporting, leveraging their expertise in understanding and explaining complex regulatory requirements. This could position CPAs as essential advisors in the compliance landscape, potentially opening new service offerings and revenue streams (WK Expert Solutions) (FinCEN Report).
Legal and Regulatory Risks: There are potential legal risks associated with advising on BOI reporting, particularly concerning the unauthorized practice of law. CPA firms must carefully navigate these risks by reviewing engagement letters and ensuring they do not overstep into legal advisory roles. Using enhanced engagement letters, as suggested by professional liability insurers, can help mitigate these risks (FinCEN Report).
Compliance and Monitoring: The phased access to the BOI IT system and the requirement for CPA firms to certify each request for BOI access mean that firms will need to establish rigorous compliance and monitoring processes. This includes developing policies for secure data handling, obtaining necessary client consents, and ensuring that any third-party service providers adhere to the same standards (Davis Polk) (WK Expert Solutions).
While the new BOI reporting requirements present challenges, they also offer CPA firms an opportunity to enhance their service offerings and strengthen client relationships through expert compliance support.
Have questions yourself? Need assistance with BOI reporting requirements? Just reach out, we’d love to help.
