All beneficial owners of LLC companies will appear to the federal government – Metro Puerto Rico

About 165,000 companies and other legal entities in Puerto Rico must, starting this year, report to the United States Department of the Treasury the identity of all individuals who own or retain control of the entity, directly or indirectly.

However, the information the federal government receives will remain confidential and will be shared only among law enforcement agencies and certain banking companies to comply with other federal anti-money laundering laws.

The new rule came into effect with the start of the new year as a result of the Federal Corporate Transparency Act of 2021. According to the statute, the goal is to combat financial crimes committed by entities registered in United States jurisdictions, including Puerto Rico. , which have little or no information available about their owners or beneficiaries.

“Effective January 1 of this year, basically all corporations and other legal entities (in Puerto Rico) must submit certain information proving the identity of their beneficial owners, or ‘Beneficial Owners’ In English,” Secretary of State Omar Marrero confirmed in an interview with the Center for Investigative Journalism (CPI).

There are 168,577 active legal entities in Puerto Rico, according to State Department data provided to the CPI. This figure is mostly split between corporations (75,118) and limited liability companies, or LLCs (79,781). The latter is one of the most attractive ways to organize certain types of businesses due to its flexibility and minimal advertising requirements.

Existing entities have one year until January 2025 to report to the federal government the name, date of birth, address and license or passport of those who control or own the company. Companies formed on or after January 1, 2024 will have 90 days from their registration to submit their report.

Failure to comply with the new rule carries penalties ranging from a fine of $500 for each day of non-compliance to two years in prison or a fine of up to $10,000. The responsibility to inform and comply with the new federal law also falls on the company’s top executives.

Reports, which do not involve payment of taxes or fees or require the intervention of a lawyer or accountant, can be filed online. Last September, the Financial Crimes Enforcement Network, or FinCen in English, published compliance guidance for small businesses, tasked with enforcing the new law by the Treasury Department.

The list of 23 types of companies that are exempted from filing these reports include banks, cooperatives, securities brokers, insurance companies and manufacturers, large operating companies, investment companies, accounting firms, and tax-exempt organizations. According to compliance guidelines, large companies are those that have more than 20 full-time employees, are headquartered in the US and that report $5 million or more in gross receipts to the Internal Revenue Service (IRS).

According to the Secretary of State, many exempt entities are highly regulated and are required to disclose beneficial owner information to various regulatory agencies. Companies that are inactive also do not have to submit new reports to FinCen.

“Outside of these very limited exceptions, all corporations, all LLCs, all foreign legal entities in the United States, both continentally and in its territories, have to submit that information directly to FinCen,” Marrero added.

He asserted that the responsibility for enforcing this new rule falls on the Treasury, not the government of Puerto Rico.

He explained that the role the Department of State will play is limited to informing and educating Puerto Rico about the new federal requirement through the press, professional organizations such as the College of Certified Public Accountants, and direct online notifications.

According to Marrero, the agency sent an email notification to all entities registered at the time in December.

However other places in the world, such as the European Union, “give the public more access to some data onBeneficial owners”, as the names suggest, federal law declares information obtained through the new report to be confidential.

Still, law enforcement is an important event, said Erica Hanachak of the Washington, DC-based Financial Accountability and Corporate Transparency Coalition (FACT Coalition), which brings together about a hundred organizations aimed at combating financial corruption.

“It is the most significant update to anti-money laundering laws in the United States in the last 20 years,” Hanachak said. “Getting a library card requires more information than creating an entity, company or corporation (in the United States),” he added.

Hanachak explained that, although the information obtained would not be public, law enforcement agencies, such as the Internal Revenue Service (IRS), could use it to detect and investigate financial crimes. It is estimated that more than 32 million organizations will have to comply with the rule during the first year of accreditation.

Globally, the US is one of the jurisdictions where the least corporate transparency exists, according to Hanachak. In 2021, Treasury Secretary Janet Yellen admitted that the United States is possibly one of the best places in the world to hide and launder money.

This includes Puerto Rico.

In February 2019, the European Commission added Puerto Rico to its list of high-risk jurisdictions for “strategic deficiencies” in its practices against money laundering and the financing of terrorist activities. At the time, the US Treasury rejected Puerto Rico’s inclusion and raised a flag about the evaluation process followed by the European Commission.

A recent CPI investigation revealed systemic failures and lack of financial resources in monitoring institutions and their owners in Puerto Rico, some of which have been investigated and charged with financial crimes by federal authorities.

Additionally, in 2021, as part of a multinational investigation by the International Consortium of Investigative Journalists Pandora Papers, CPI revealed how some international banks established in Puerto Rico were used to open accounts and transfer money from opaque companies and businesses. offshore

whose owners often stay behind the scenes to hide assets from tax payments or, in the worst case, money laundering and other illegal transactions.

“Because of the secrecy benefits they offer, (these opaque entities) have become an essential part of complex networks aimed at hiding assets, avoiding tax evasion and making it more difficult to figure out who is really behind the operation,” Hanachak said. .

Although the physical address, telephone number, and names of authorized persons, resident agents, officers, and company constituents are already disclosed in Puerto Rico, the State Department does not require data on beneficial owners like most states and territories. Americans. Under the new rule, a company will have to file a new report with FinCen whenever there is a change in control of the entity.

beneficial owner, or “Beneficial OwnerAccording to FinCen, “in English, is any person who has direct or indirect ownership or control of a company.”

Marrero assured CPI that there would be no change to the required information and that it is already disclosed on the State Department’s website, although this may be consistent with the information provided in the Beneficial Owners report to FinCEN.