Mark Kenney - retirement

Most business owners are probably unaware that the Corporate Transparency Act went into effect on January 1, 2024. More importantly, this new law will directly impact the day-to-day operations of many business owners. Intended to combat money laundering, human trafficking, and funding terrorism, this new law brings with it new reporting requirements with an array of penalties.

We’re thrilled to welcome David Chaves back to the podcast as he brings unique skills and experience to talk about this very important topic. He’s a retired FBI Agent, attorney, and keynote speaker on topics including white-collar crime, compliance, risk management, government investigations, and leadership.

In this conversation, we’ll explain why most businesses will be impacted by this law, how to ensure your business complies with FinCEN if necessary, and how to get ahold of David’s ebook to learn more.

In this podcast discussion, you’ll learn: 

  • Who within your company may now need to file for corporate transparency compliance and why it matters.
  • Reporting deadlines for FinCEN compliance and potential fines for noncompliance.
  • Who will be able to see your FinCEN compliance information after you file.
  • Why FinCEN compliance is catching the United States up to the rest of the world.

Inspiring Quotes

  • “You can’t open up an account for an LLC without this being verified. You cannot open up a bank account without doing the right thing.” – David Chaves


Matthew Peck: Welcome everyone to another edition of SHP Financial’s Retirement Road Map podcast. I’ll be your host today, Matthew Peck, joined by my business partner, Keith Ellis, of many, many years, of course. And today, we have a special guest. Well, actually, I should say recurring guest. After sort of walking us through some estate planning for first responders, we had to have him back on because there’s a big change that just happened to all business owners, or just for anyone that’s sort of interested in corporate law or changes that are happening here in 2024. So, to repeat, attention, all business owners, you are going to want to listen to this because something is now in effect that is going to directly impact your day-to-day business. So, without much further ado, let me bring on David Chaves. Welcome back to the show.


David Chaves: Thank you, Matt. It’s good to be back. Keith, thanks for having me back.


Keith Ellis, Jr.: Thanks for coming in.


David Chaves: I wanted to take a few minutes out just to kind of introduce people to something called the Corporate Transparency Act that became effective January 1st, ‘24. And I have created an e-book, which I like to do. I think it’s informative. It breaks down what the reporting requirements are. And just to give you a little background, it was created to combat money laundering, to combat human trafficking, terrorism financing. And the law was actually passed three years ago, just being enacted now with the rollout January 1. Government can be a little slow at times, but it really is keeping pace with the rest of the world that has a lot better reporting requirements than we do.


So, we’ll go over the essentials of this, what it means for the person with an LLC or corporation. And there are penalties that go along with this. So, we’ll have to go and discuss that. But it’s being run by an organization called FinCEN, which is a division of the US Treasury. And FinCEN stands for Financial Crimes Enforcement and unlike the usual alphabet governmental agency, FBI, CIA, they are FinCEN. And this is a serious group of folks. I work closely with them when I was in the FBI and they carry around guns. So, this is a criminal entity, right? But they are also very professional and they’re very squared away and they do a very good job. So, the rollout of the Corporate Transparency Act probably isn’t going to be perfect to begin with, but I have confidence in FinCEN that they will get it right. But that’s essentially what it is. It is a vehicle to protect against money laundering, terrorism financing, and other bad guys.


Keith Ellis, Jr.: So, really, they are asking corporations and you tell me to kind of report who’s working for them or where they’re getting their money from, I guess. How does that work? I see the intent, like you said, is to look at their earnings or where their money’s coming from to make sure there’s no terrorism, like you said, God forbid, human trafficking or anything like that. That’s obviously extremely important. But who does this impact? How does this kind of all unfold, I guess?


David Chaves: Yeah. So, first analysis is to look at who the beneficial owners are of the entity. So, if you have a 25% stake in an LLC, for example, you are a beneficial owner, even if you do not have a 25% control or interest in it but you are controlling party, you could be someone from the C-suite or someone that was a big decision maker in the operation of that LLC, you are a beneficial owner. So, that really is the test to determine who has to report. And there could be multiple people reporting for each entity.


Matthew Peck: Okay. So, just to walk that back a bit just for all of our listeners. Okay, so we have the Corporate Transparency Act that is in effect now, I mean, literally January 1st, 2024. And it has never been– this is brand new. I mean, we are talking hot off the presses. Obviously, you talked about it, it was passed a couple of years ago. But now, actually, it’s sort of enforceable or however you want to put it. So, there’s something called the Corporate Transparency Act that all business owners, well, actually, that’s kind of my question. So, who needs to be aware of this change?


David Chaves: Okay. So, this is where we have to kind of dissect your company structure. So, if your company was created with the filing of a document at the Secretary of State of your respective state, you are going to be a mandated reporter. So, if that looks like an LLC, a corporation, there are exceptions and I can talk about a few of them. But if it was created through a filing of a document at the Secretary of State, you’re required to report. Now, that is for 32 million businesses in the United States.


Matthew Peck: Well, just say, it sounds like pretty much everybody then, right? Oh, no, you mentioned there’s exceptions, but I mean, because we file. I mean, I know we’re a small business here in Mass, but we file.


David Chaves: Yeah. No, and it’s going to affect 99% of the business population unless, I mean, here are a couple of the exemptions. If you have 20 or more employees with $5 million or more in revenue last year, then you don’t have to report if you’re a financial institution, if you’re a broker/dealer, if you fall into one of 23 of the categories for exemption. And the reason why that is because some people I’ve talked to are like, “Oh, sure, the big folks don’t have to report on this, but the moms and pops do.” Well, that is true. But the big business folks are already complying through the heavy regulation.


Keith Ellis, Jr.: Yeah, we do anti-money laundering. We do all that stuff already.


David Chaves: Right. So, that’s why I don’t want people to become cynical, like, “Oh, it’s only us being affected.” That isn’t the case. This already in place, these markers to evaluate these types of problems that are addressed here. But again, that 23 exemptionless, it’s unlikely most of your clients are going to fall into that. So, that’s why we need to get this out there.


Matthew Peck: So, most likely then, if you are listener and if you are self-employed or a part of a small business and, I’m sorry, what was the exact term? And you mentioned an entity or what? I’m sorry.


David Chaves: Yeah. So, when we’re talking about legal structures, we refer to them often as entities. So, it could be an LLC, it could be a corporation, things that aren’t held in your name individually. So, sole proprietorships, again, here will not have to report. Now, this just may add to the mix of, okay, how do the bad guys now find some of those loopholes either in the 23 exemptions or the sole proprietorship? This is evolving. It will change over time. But at least we have a baseline now.


Matthew Peck: And so, when you say report, walk people through that. What do they mean by reporting? Is it a tax filing? Is it a form that FinCEN itself throws, gives you to fill out? How does this work?


David Chaves: So, it’s all done through the FinCEN website, something called BOI, Beneficial Ownership Information. BOI, so if you go to, you will see an area there to file for the application. Now, what you have to do as a beneficial owner once you’ve derived that you are in fact the beneficial owner because someone has to be and there may be more than one person, you have to provide them, and some people a little squeamish about this, your name, your date of birth, your residential address. Not your business address, your personal residential address, no PO Box, nothing like that, physical address and a driver’s license or passport that is unexpired.


Now, people are like, “I created an LLC or corp to have some anonymity with that.” Well, that will continue to exist. This is not a public database it’s going into. In fact, there are only a limited number of people and I can go through those who will have access. So, you can also, and I’ve looked into this, I’m not sure if I want any of my clients doing this just yet, but instead of providing this information for every entity you own, you can get a FinCEN identifier. You provide this once, they give you an identification number that you use to populate each and every one of your applications.


Problem being that if there’s a change in your driver’s license, your passport, it expired, you have a new issue, a new expiration date, you must within 30 days notify FinCEN of those changes, will be subject to a penalty. So, this is like an engagement that you may think is one and done. But if there’s some modification anywhere, whether it’s to your identity, a change in ownership, or a change in business structure, that has to be reported in 30 days.


Matthew Peck: Well, and about that, so then what are deadlines here? I mean, if you are a business owner and this literally just went into force, again, however many weeks ago and whatnot, and then is there a deadline? So, what are some of the other time horizons that business owners should be aware of?


David Chaves: So, for the people that knew about this, there was a rush to create LLCs just before the new year, because if you created or have an entity in existence prior to January 1, 2024, you don’t have to report any of this until January 1, 2025. You have one year to comply. Also, it does not require that company applicant’s report. So, meaning if your attorney created your LLC or your CPA, their information doesn’t have to be included in this BOI report to FinCEN. Beginning January 1, ‘24, if an attorney CPA creates this, they also have to file their information in this report.


So, if you created a new entity just starting last week, you have 90 days to report that information. If you don’t, there are penalties for doing so. And I would think, knowing FinCEN, they will be thoughtful in how they assign fines here because it is a new area of reporting. So, I don’t expect they’re going to be coming out and really dinging people at this point, but over time, they’re going to start to enforce those fees, $500 a day for being not…


Keith Ellis, Jr.: A day?


David Chaves: $500 a day for being noncompliance up to $10,000 fine. But if there’s some type of willful omission, we’re talking criminal penalties. They’re also criminal authorities. So, we do not want to venture there. And I know some people will be hesitant to say, “Oh, the government wants too much.” Well, having been in government for many years, I kind of get that and I understand that. But I do see the value in having a law on the books like this that is helping to protect our country in so many ways and to protect against human trafficking and things like that. So, there is really a valid reason for this.


And again, as I had mentioned, people are like, “Oh, it only affects the moms and pops.” It’s true. But when you look at that as a vehicle for committing these crimes, that’s how they use these structures, these shell companies to achieve this. We just don’t see it. Your customers, your clients don’t see it because they are working hard. They’ve established these businesses. They’re doing the right thing. But there are people out there with a nefarious purpose that use these vehicles for these purposes.


Matthew Peck: I mean, you mentioned, obviously, terrorism and whatnot. I mean, and not to make light of it by no means, but anytime the Hamas in Gaza, it’s like those rockets cost money, I believe. You know what I mean? They’re just firing them off. Oh, another couple of hundred missiles were fired off. And it’s like, where do they get the money to pay for these things? Do you see what I mean?


David Chaves: Yes. And this will at least address many of those concerns. It’s not going to be foolproof. This isn’t going to solve those types of problems, but it’s going to be more difficult for people to actually achieve that. But it comes at a little inconvenience to the rest of us because this type of reporting is kind of like for the life of your business, because if something changes in your business, as I had mentioned here, you had someone leave the company, had someone come into the company, you got a new president and there was chief financial officer, all these changes have to be reported within 30 days.


So, we have to get used to dealing with this. Otherwise, we’re going to have clients coming to us saying, “Oh, I wish I had known about this.” And so, we’re going to get it out there. And we got to be vigilant in saying, “Hey, it’s not just a matter of what we filed today, you’re covered.” But if there are changes, making sure that they understand that we need to report those.


Matthew Peck: Well, and that’s going to be my other question is that, and almost personally, Keith there for you and I here, I mean, in your opinion, is that something that the CPA should be notifying their clients on? Is it something that the chief financial officer, I mean, like, who do you think is going to eventually own that to say, “Hey, oh, you’ve changed your address or whatnot. I need to make sure FinCEN is updated”?


David Chaves: Yeah, great question, because we all have some degree of responsibility because I can tell you, just putting this information out on LinkedIn, the post I made, people don’t know about this.


Keith Ellis, Jr.: No.


David Chaves: They’re like, “Well, what’s that? What’s going on with that?”


Keith Ellis, Jr.: And that’s what I was going to say. This is why we’re doing this podcast. You know what I mean? It’s because people don’t know and it’s something that they need to know because you just talked about some pretty stiff penalties on a daily basis.


David Chaves: Daily basis.


Keith Ellis, Jr.: That’s incredible.


David Chaves: They’re pretty severe. And notice is so important. FinCEN is doing their best to get this stuff all out there. But as you can see it, a lot of people don’t know about it. And when they hear this for the first time, they’ll be like, “No one told me about that.” CPAs are a great place for people to learn about it. And I’m sure CPAs with a continuing education, everything that they’re doing, are aware of this, but it’s a possibility they’re not. And now, who’s going to file this on your behalf? Can you do this on your own? You absolutely can. But first, you’re going to have to read through this 50-page…


Keith Ellis, Jr.: I was going to say, you have a 50-page document sitting in front of you, which I know you’re simplifying this law.


David Chaves: Yeah. We’ve reduced these 50 pages and another couple hundred pages on the law itself. This is a guide from FinCEN for corporate governance on these issues. And it is quite involved.


Keith Ellis, Jr.: Yeah. I mean, if you own a business, it behooves you to get your hands on this e-book and you make it available on, what is it,


David Chaves: Yeah. So, if you go to,,, we try to get your coming in different places, we make this available to you.


Keith Ellis, Jr.: I mean, it’s so important, you’re bringing new laws to the table that you miss filing an LLC, it’s 500 bucks. You know what I mean? This is a daily fine that is up to $10,000. It’s pretty stiff.


Matthew Peck: Well, and we consider ourselves relatively in the know, I mean, receiving whether it’s market updates or tax updates or whatnot. I mean, I can personally say that I did not see the Corporate Transparency Act, these headlines anywhere. Do you see what I mean?


Keith Ellis, Jr.: Right. Yeah, I mean, I didn’t see it. The only reason why we knew it is because we had Christmas lunch with Dave. You know what I mean?


Matthew Peck: We talked about it.


Keith Ellis, Jr.: We talked about it. I mean, it was a very insightful lunch.


Matthew Peck: Yes, exactly.


Keith Ellis, Jr.: We’re all asleep at the end.


David Chaves: We were supposed to leave business at the office, but that’s when we talked about business in our Christmas luncheon. But it really is important and I’m hoping that CPAs, attorneys, although most attorneys aren’t aware.


Keith Ellis, Jr.: I was going to say you’re the only one that I’ve ever heard talk about this.


David Chaves: When I’ve tried to get this word out, people are like, “What are you talking about?” I’m like, “Well, let me send you my e-book, and it might help you.” But now, we’re talking about, this all goes into a database and people are like, “Great. I have an LLC to protect my personal information. Now, I’m putting it into a government computer system.” And it’s true. You are. But they do have a high level of security protecting this information.


Although I say that, but my own personal information through the Office of Personnel Management when I was with the government and post government has been compromised several times. And you get those letters from the credit agencies saying, “Hey, you have this free protection because you were exposed.” And so, this no foolproof protection, there are set penalties for anyone that tries to hack into the system, but who is going to be able to see it? Nobody, except six exceptions. And let me just tell you, it could be a federal agency. It could be the FBI, some other federal agency looking to verify ownership information. It could be state law enforcement agency that has a court order, the Treasury Department itself, which is part of FinCEN, or FinCEN is part of US Treasury.


Now, financial institutions with companies consent, and I’ll go back to that in a second, and government regulators and certain foreign authorities that request the information through a US agency. So, now, banks are folks that can look at this information. And why is that? Because you create your LLC. You go to the bank, “Hey, I want to open up a bank account.” And they’re going to say, “Did you file with a Corporate Transparency Act?” That’s going to be hopefully their first question.


Keith Ellis, Jr.: That you would hope.


David Chaves: And you’ll say, “Hopefully, yes. I listen to Dave.” And so, now, they give you a form to consent for you or the bank to check that you did with FinCEN. So, the bank has this new checkbox for these types of companies that they have to verify with FinCEN that you filed. And there’s a check in balance, because government regulators of financial institutions that will conduct their normal audits at banks and they’ll go in to determine if they’ve been following this protocol. So, government regulators of banks will be able to observe and audit banks to ensure that they are complying with this statute.


Matthew Peck: Okay. So, if I wrap my mind around that for a minute, literally– no, we’re talking about the general day-to-day operating of your business. I mean, you open a business, that’s one thing. But any business that’s going to open is going to want a bank account, but you’re not going to be able to even open up a bank account unless you do this.


David Chaves: That’s exactly right. If the bank is following the proper protocol, I would expect every bank is aware of this. But they can’t open up an account for that LLC without this being verified. So, you cannot open up a bank account.


Keith Ellis, Jr.: Without doing the right thing.


Matthew Peck: And to a certain extent, too– sorry to interrupt, Keith, I mean that’s whether you’re grandfathered in or not grandfathered in, whether you formed your LLC here, whether you formed LLC a couple of months from now, it’s the same idea, right? All these banks are going to start asking. Most likely, these banks will start asking you whether that you file.


Keith Ellis, Jr.: Checks and balances. And my question is like, do you ever see a time? And obviously, you probably don’t know this, where you do file for an LLC at the state level and then at the end, you hit submit and then that directs you to FinCEN to then fill that out. That would be a very nice system. I know that’s maybe asking a little bit too much.


David Chaves: It might be. But it would make sense.


Keith Ellis, Jr.: Just to get all the box checks. Because when you build these, you go get an FID number or a TIN number, right? Then you have to go to this side. And it’s like if you could compile that all into one package to make it simple for someone to open a business and all the boxes are checked, so I mean, again, maybe I’m asking too much.


David Chaves: That would definitely streamline it. And maybe one day, we’ll be having our podcast until that happens.


Keith Ellis, Jr.: Yeah, more than 30 years from now.


David Chaves: I can tell you, in my government service, we’re just paper monsters. We just create paper. We create a lot of forms. Here, I have to say, the FinCEN folks have done a really nice job at tailoring this and streamlining the process in a very digestible way, which was shocking. Now, I was hesitant to say, “Hey, they’re talking about rolling this out January 1, ‘24.” Maybe they’re not going to do it. It’s not going to be ready. They were ready. The site works. I’ve been on it. And I’m amazed.


So, now that they’re up and running, there are going to be some contingencies and some changes as we move forward. I’m sure little changes, nuances. But right now, we’re required to file. We’ve got to do it. We’ve got to get people, our clients, and not waiting to those last moments, right? To like, “Oh, my corporation was set up in ‘23 or earlier, I have a year.” Yeah, you do.


Keith Ellis, Jr: Just do it, yeah, because you’re not going to remember eight months from now. You know what I mean? Listen to the podcast. Go to McManus Estate Planning, but first, get the e-book, and then go to FinCEN file. Be done with it.


David Chaves: And that’s one of the things, McManus Estate Planning specializes in estate planning. That is the goal. That’s what we’re great at. Keith has worked 27 years of perfecting this, but now, we have so many clients with business interests.


Keith Ellis, Jr.: Absolutely.


David Chaves: This is something, a service that we’re not providing because we don’t see a lot of people advertising this and then saying, “Hey, we’re here to take care of this problem for you.” Because we have that relationship with our clients that do have business structures, this just goes hand in glove with that.


Matthew Peck: Well, and to kind of go back to something else we talked about, when they’re looking for terrorists, I mean, I just like, because I imagine this, there’s probably business owners out there reluctant as you were mentioning to give information to us, black box, government database. What are they doing following me? It’s like, I think, just to be clear, I mean, again, they’re going after the bad guys, the money launderers, not the people that are like, “Oh, well, my husband, it’s like me and my wife, our names on the business account and we’re trying to get tax breaks, but oh my goodness, is the IRS going to come down and come crashing through my window?”


David Chaves: Right. Oh yeah.


Matthew Peck: Let’s just be clear about who you’re trying to actually get. Who are the bad guys here? Do you see what I mean?


David Chaves: Right. It really is honest business people reporting information to the government that is protected in some way and accessible only by lawful means for those six areas that I had discussed earlier. This won’t be public in any way. They maintain that anonymous position that they wanted. But yeah, listen, I’m going to have to do this. Anyone with an LLC is going to have to do this. And when you give up your own residential information or you put up a picture of your passport or your driver’s license, you can’t help but feel like that is an intrusion. But again, no one is going to be exploiting this database.


Matthew Peck: And you also mentioned, too, that this is just the rest of the world. I mean, when it comes to anti-money laundering and other sort of financial activities that they’re monitoring, this is, as you mentioned, bringing to line with the world at large.


David Chaves: Absolutely. And a lot of other countries were starting to poke holes like, well, you don’t have the proper protections in place. How do we know when we’re dealing with the United States companies that they have been vetted and information properly reported? Now, we’re getting in line with the rest of the world. We’re just behind in this area. This is a catch-up. Again, 50 pages condense information from the bill are here. I invite anyone to read through it, because I do think they set it out in a way that is digestible.


But there are a lot of twists and turns that have to require some thoughtful analysis of what your reporting requirement is going to be. So, I’m here to do that. McManus Estate planning is here to do that. Happy to set up a phone call, have you come in. But we can’t let any of our clients get caught up in getting their $500 a day penalty.


Keith Ellis, Jr.: Yeah. That would be no good.


Matthew Peck: No. Absolutely. So, again, if you’re a business owner and whether or not you’re aware or unaware, there is now something called the Corporate Transparency Act that’s going to require you to file by year end with FinCEN to make sure that there isn’t any type of anti-money laundering and terrorist activities and all the different aspects. But I should also say attorneys, CPAs, anyone else that’s listening that if you are involved in small businesses and helping to advise small businesses in any way, shape, or form, this is information that you need to have, as well. So, as I mentioned, Attorney Chaves put an e-book on Did I get that right?


David Chaves: Yeah. And,, it’s all going to get you there.


Matthew Peck: Okay. That gives you a great starting point to learn more about the history of the act itself, what you need to do, what some of the fines are that Keith was mentioning that can– I mean, $500 per day, yeah, that’s a little bit of a motivation to make sure you are absolutely in alignment and are doing everything you need to do to avoid those unnecessary penalties.


I should also add to that, hopefully, you enjoyed today’s podcast, because as much as certain days, we’re talking about investment planning and tax planning and financial planning in general, our purpose here at SHP is to make sure that people have the information that is critical for them to make wise decisions, whether it’s wise decisions in regards to business formation and making sure that you’re in compliance with all of these new rules, or whether it is when to take Social Security, right? So, at first, you might think, “Okay, are they all interrelated?” But they are, because these are the types of changes that can happen that you might not be notified of, and your financial advisor might not be notified of, and your attorney may or may not be notified of. But we want to make sure that everyone here at SHP and all of our teammates, such as Attorney Chaves, etc., are always here to make sure that you have the most critical information in front of you. So, again, thank you so much for listening. Hopefully, stay tuned next time.

The content presented is for informational purposes only and is not intended as offering financial, tax, or legal advice, and should not be considered a solicitation for the purchase or sale of any security. Some of the informational content presented was prepared and provided by tMedia, LLC, while other content presented may be from outside sources believed to be providing accurate information. Regardless of source no representations or warranties as to the completeness or accuracy of any information presented is implied. tMedia, LLC is not affiliated with the Advisor, Advisor’s RIA, Broker-Dealer, or any state or SEC registered investment advisory firm. Before making any decisions you should consult a tax or legal professional to discuss your personal situation.Investment Advisory Services are offered through SHP Wealth Management LLC., an SEC registered investment advisor. Insurance sales are offered through SHP Financial, LLC. These are separate entities, Matthew Chapman Peck, CFP®, CIMA®, Derek Louis Gregoire, and Keith Winslow Ellis Jr. are independent licensed insurance agents, and Owners/Partners of an insurance agency, SHP Financial, LLC.. In addition, other supervised persons of SHP Wealth Management, LLC. are independent licensed insurance agents of SHP Financial, LLC. No statements made shall constitute tax, legal or accounting advice. You should consult your own legal or tax professional before investing. Both SHP Wealth Management, LLC. and SHP Financial, LLC. will offer clients advice and/or products from each entity. No client is under any obligation to purchase any insurance product.
Was this information helpful? Should we publish more like this?