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In today’s increasingly complex regulatory environment, lawyers and CPAs must navigate a myriad of compliance requirements. One of the key tools at their disposal under the new reporting requirement for new entities – Corporate Transparency Act (CTA) – is the FinCEN Identifier (FinCEN ID). Should lawyers obtain FinCEN IDs?
The FinCEN ID is a unique identifier issued by the Financial Crimes Enforcement Network (FinCEN) for individuals to report on Beneficial Ownership Information Reports (BOIRs) in place of certain required pieces of information. While lawyers will generally not find themselves being reported as beneficial owners on these reports, they may end up being reported as company applicants.
While obtaining a FinCEN ID might seem like just another bureaucratic step, it actually offers significant advantages that can enhance a lawyer’s practice, protect their privacy, and ensure compliance with critical regulations.
Enhanced Privacy: Safeguarding Your Personal Information
Privacy is a major concern for legal professionals who routinely handle sensitive information for their clients. Under the CTA, lawyers involved in company formations must provide their personal information on each BOI report where they are involved in forming the company. Sending their information to each client that they service not only increases their exposure to information leaks but also can be a hassle.
A FinCEN ID changes this dynamic. By substituting the lawyer’s personal information with a unique identifier, the FinCEN ID ensures that sensitive details are being directly submitted to the government, not middle-manned through the new entity BOI reports.
This means that while the necessary regulatory information is still provided to FinCEN, the lawyer’s privacy is better protected. For attorneys who value discretion and security, this is a significant benefit that can offer peace of mind in an era where data breaches and identity theft are on the rise.
Administrative Efficiency: Streamlining the Reporting Process
Another compelling reason for lawyers to obtain a FinCEN ID is the increase in administrative efficiency it offers. The application process for a FinCEN ID is relatively quick, taking only 5-8 minutes to complete. Once obtained, this ID can be shared instead of repeatedly sending the five pieces of required information every time a BOI report is filed.
This streamlined process saves valuable time that can be redirected toward more critical tasks, such as helping clients with the CTA or other compliance-related matters. For lawyers who are not directly engaging in this reporting requirement but still need to support clients, having a FinCEN ID reduces the amount of time spent on administrative tasks, thereby improving overall productivity.
Should Lawyers Obtain FinCEN IDs? A Valuable Tool for Today’s Legal Professionals
With an estimated 5.6 million new entities to be formed each year that will need to comply with the CTA, means that obtaining a FinCEN ID will be increasingly important for lawyers involved in corporate formation going forward.
For legal professionals who want to stay ahead of the curve and provide the best possible service to their clients, obtaining a FinCEN ID is not just a recommendation—it’s a strategic necessity.
