Beneficial ownership information (BOI) reporting

BOI reporting was originally designed as a comprehensive transparency requirement to identify and disclose the real people who ultimately own or control companies. The goal was to combat money laundering, terrorist financing, and other illicit activities by eliminating the anonymity that and complex ownership structures can provide to criminals.

The Corporate Transparency Act, enacted as part of the , initially required most U.S. business entities, including hedge fund vehicles, to report beneficial ownership information. However, implementation faced significant constitutional challenges and concerns about regulatory burden on small businesses.

On March 26, 2025, FinCEN published an that fundamentally transformed the regulatory landscape. The Treasury Department simultaneously announced it would not enforce penalties against U.S. citizens or domestic companies, effectively exempting the entire U.S. domestic business sector.

Current scope of BOI reporting:

• Subject to reporting: Only foreign entities formed under foreign law that have registered to do business in any U.S. state or tribal jurisdiction (must report only non-U.S. beneficial owners)
• Exempt: All U.S. domestic entities including hedge funds, management companies, and investment vehicles; all U.S. persons as beneficial owners

For the limited entities still subject to BOI reporting, beneficial ownership focuses on individuals who either:

• Own 25% or more of the entity's
• Exercise substantial control through senior positions or decision-making authority

This 25% threshold aligns with other regulatory frameworks such as under securities laws and requirements under the .

The elimination of CTA BOI reporting for U.S. hedge funds does not affect other obligations, which operate under separate regulatory frameworks:

• Investment Adviser AML Rule: Requires certain and to implement AML programs and report suspicious activities (effective date postponed to January 1, 2028)
• Enhanced due diligence: Required for high-risk investors including
• Know your customer procedures: For investor onboarding and ongoing monitoring

U.S. hedge fund managers: No action required under the Corporate Transparency Act. However, managers should:

• Monitor potential regulatory changes as FinCEN may reassess these exemptions
• Continue compliance with existing AML obligations under other frameworks
• Prepare for Investment Adviser AML Rule compliance (effective January 1, 2028)

Foreign hedge fund entities: Those registered to do business in the United States should evaluate BOI reporting obligations and ensure compliance with applicable deadlines.

The Treasury Department will not enforce penalties against U.S. citizens or domestic companies under the Corporate Transparency Act, applying to both past deadlines and future changes. However, foreign entities subject to reporting requirements still face significant penalties for non-compliance, including substantial fines and potential for willful violations.

FinCEN intends to solicit on the interim final rule and may issue a final rule during 2025 that could reimpose some BOI reporting requirements, particularly for U.S. companies with foreign owners presenting anti-money laundering risks. Any reimposition would likely provide adequate notice and compliance timelines.

U.S. hedge funds are exempt from Corporate Transparency Act BOI reporting requirements as of March 26, 2025. While this represents a significant change from the original regulatory framework, hedge funds must continue complying with other AML obligations and should monitor potential future developments in BOI reporting requirements.