BOI Filing & CTA: What Founders Need to Know Now

TL;DR

The new Corporate Transparency Act (CTA) requires a BOI filing, but legal battles have made it optional for now. Understand the risks, penalties, and what this means for your startup. #VentureStep #CTA #BOI

INTRODUCTION

Shell companies, hidden owners, and a complex web of financial secrecy—it sounds like the plot of a spy novel, but it's a reality that the U.S. government is actively trying to dismantle. The primary weapon in this fight is the Corporate Transparency Act (CTA), a law that introduces a new requirement for many businesses: the Beneficial Ownership Information (BOI) filing. This new rule is designed to pull back the curtain on anonymous corporate structures often used for money laundering and other illicit activities.

In this episode of Venture Step, host Dalton Anderson dives deep into the implications of the CTA and BOI filing for entrepreneurs. Using the recent, shocking money laundering scandal at TD Bank as a backdrop, Dalton explores why these regulations are being pushed so hard. He connects the dots between a top-10 bank facing a $3 billion penalty for gross negligence and the government's push for greater transparency from every small business owner.

Dalton breaks down the ongoing legal battles that have put the mandatory filing on hold, the severe penalties for non-compliance, and who is ultimately exempt. He cuts through the legal jargon to provide a clear-eyed view of what founders need to know, whether they should file voluntarily, and how this new layer of regulation could impact their operations, even if the government's own website to file is currently down.

KEY TAKEAWAYS

• The Beneficial Ownership Information (BOI) filing, part of the Corporate Transparency Act, aims to combat financial crime by identifying the true owners of companies.
• Due to ongoing legal challenges, particularly a ruling in Texas, the mandatory January 1st deadline has been suspended, making the filing currently optional.
• Penalties for non-compliance are severe, including civil fines of $500 per day, up to $10,000 in criminal penalties, and potential prison time.
• Most small businesses are required to file; exemptions are primarily for heavily regulated industries like financial services, accounting firms, and large operating companies.
• The filing process itself is straightforward, requiring basic personal and business information, but the government's own filing portal has faced technical issues.

FULL CONVERSATION

Introduction to the BOI Filing and CTA

Dalton: Welcome to VentureStep Podcasts where we discuss entrepreneurship, industry trends, and the occasional book review. ¹Shell companies, hidden owners, and a web of financial secrecy. ²Sounds like a spy novel or some kind of movie, right? ³Nope, it's reality. ⁴Today we're going to be discussing the BOI filing that is pending to be required to file January 1st next year. ⁵The reason I say pending is because it's up in the air and TBD depending on the appeal of the Department of Justice in response to some of the rulings from court cases from various states. ⁶That being said, the BOI filing is related to what is called the Corporate Transparency Act or CTA. ⁷So I'll be saying CTA and BOI pretty often. ⁸BOI is the Beneficial Ownership Information Filing. ⁹

In this episode, we'll be discussing TD's recent money laundering scandal, the legal cases and their rulings so far, and how this potentially would affect your business. ¹⁰I was also going to show you how to file by doing my own filing for my two LLCs, but the website seems to be down for the form. ¹¹You would fill it out on the Financial Crimes Enforcement Network website, FinCEN.gov/BOI. ¹²You go there, it's right on their homepage, you click on BOI, and then "how to file." ¹³There's a form you fill out and that's it. ¹⁴It's really easy. ¹⁵When I clicked the link, it seemed like it was sending me to their test environment, so maybe that's why it's down. ¹⁶I don't know. ¹⁷I would like to caveat this episode with I'm not a lawyer, nor am I an accountant. ¹⁸If you are seeking legal or financial advice, please do so with a professional who has licenses in the areas that you're doing business. ¹⁹

TD Bank's $3 Billion Money Laundering Scandal

Dalton: Okay, before we dive in, I'm your host Dalton Anderson. My background is a bit of a mix of programming, data science, and insurance. Offline, you can find me running my side business or lost in a good book. ²⁰

So, TD's money laundering scandal recently came out in October 2024. ²¹Such a crazy case. ²²They face $3 billion in penalties. ²³$1.8 billion to the Department of Justice and $1.3 billion to the Financial Crimes Enforcement Network (FinCEN). ²⁴Interestingly, the Department of Justice is the one appealing Texas's ruling on the BOI filing, and FinCEN is the same agency where you would file your BOI. ²⁵

Shell companies, hidden owners, and a web of financial secrecy. Sounds like a spy novel or some kind of movie, right? Nope, it's reality. ²⁶

I don't know if it's been completely finalized, but they are getting fleeced for what they did. ²⁷You should be paying out billions for this. ²⁸TD is not a small bank; they're top 10 in the United States by assets under management. ²⁹One of the things they had to agree to is capping their growth at around $438 billion. ³⁰Is three billion enough? ³¹The more I read about it, the more I felt it was just gross negligence from the executives, management, culture, infrastructure, and system processes. ³²

The Shocking Negligence Within TD Bank

Dalton: One of the things I pulled from an article was that retail employees flagged transactions over $100 million moving in and out—illicit transactions. ³³ And TD Bank didn't do anything until law enforcement was like, "Hey, these are illegal transactions. You need to take action." Freeze the accounts. ³⁴$100 million is a lot. ³⁵If you pull out more than $5,000, you have to say what you're doing it for, and they write down the reason. ³⁶You're telling me the bank had no idea that transactions were flowing in at $100 million at a time? ³⁷

...retail employees...flagged transactions over $100 million moving in and out, illicit transactions. And TD Bank didn't do anything until the law enforcement...was like, hey, like these are illegal transactions. ³⁸

The employees were even joking about it. ³⁹It was an open joke, like, "Hey, we're complicit in money laundering and the company's okay with it." ⁴⁰And when your employees start openly joking about it, that's how you know it's so bad that it's not even a secret anymore. ⁴¹

So they were fined a couple billion and have to do a whole bunch of stuff. ⁴²They've agreed to a three-year third-party audit, they had to hire 700 new employees to help with anti-fraud, and they had to put in new procedures and use data-driven mitigation technologies. ⁴³A company that's managing hundreds of billions of dollars, and you don't have anything sophisticated? ⁴⁴It should be pretty easy to pull the data and understand what is normal and what's outside of normal. ⁴⁵

And when your employees start openly joking about it, that's how you know it's just so bad that it's not even a secret anymore. ⁴⁶

The weird thing is they also had to agree to what I feel is the worst thing: a $434 billion cap on assets. ⁴⁷They are completely limiting their growth in the U.S. until they get everything squared away. ⁴⁸It's crazy stuff. ⁴⁹It's kind of similar to Wells Fargo. ⁵⁰How do these banks do these things and say, "I didn't know. I had no idea"? ⁵¹

A Personal Anecdote on Bank Security

Dalton: It's just hard for me to understand. ⁵²I bank with Capital One and I flew to Japan and Korea. ⁵³One time, I typed in my password wrong after my fingerprint sensor didn't work. ⁵⁴I had to dual-factor authenticate for weeks, literally almost a month. ⁵⁵It was such a pain because my flights were in the app, and to see them, I had to use dual-factor, but my internet was bad while traveling. ⁵⁶

I called Capital One and said, "I am me, I've passed the dual-factor authentication for weeks now, you've got to turn this off." ⁵⁷And they're like, "Yeah, we can't." ⁵⁸The person said there is no way for any of them to turn it off. ⁵⁹It's when the system says it's okay. ⁶⁰No employee has the ability to unlock it; it's a system and algorithmic thing. ⁶¹When I asked how long it could last, they said, "Forever. It could be next day. I'm not sure." ⁶²It's annoying, but it prevents people from jerking around the system. ⁶³TD Bank could definitely use some increased controls. ⁶⁴

What is Beneficial Ownership?

Dalton: So, this Corporate Transparency Act is supposed to help mitigate the risks of foreign governments or criminal organizations from laundering money with illegal activities. ⁶⁵Beneficial ownership is defined as a natural person who has control of a legal entity and/or the legal organization structure. ⁶⁶Basically, the person who filed the legal entity, the person who is in charge, or the person who has legal control or financial benefit. ⁶⁷

What Information Is Required for the BOI Filing?

Dalton: So for this BOI filing, what's required? The demo on their website is about five minutes, so it's not extensive. ⁶⁸You have to file your legal name, your date of birth, your residence address, and your business address. ⁶⁹Then you need a unique identifying number from a government-issued ID, like your passport. ⁷⁰You type that in, go to the next page, type in some other stuff like the business name, and then you're good to go. ⁷¹So it's pretty simple. ⁷²

The Severe Penalties for Non-Compliance

Dalton: It's not overly burdensome, but the failure to comply has a penalty I feel is quite bogus. ⁷³They're saying you have civil penalties of $500 a day per violation. ⁷⁴If the filing is due January 1st and you take 10 days, that's a lot of money. ⁷⁵ You know who would have that much money? Someone who is money laundering. ⁷⁶

They're saying you have civil penalties of $500 a day per violation...criminal penalties can be up to 10,000...and then they have up to two years in...prison. ⁷⁷⁷⁷⁷⁷

Criminal penalties can be up to $10,000, and they have up to two years in prison. ⁷⁸It's just a weird scenario where it's so easy to do, but the penalty for not doing it is so severe. ⁷⁹ For what reason? I don't understand. ⁸⁰VentureStep doesn't make any money, it only has expenses. ⁸¹It literally has zero revenue for now. ⁸²So where are we getting this money from? ⁸³

Understanding the Corporate Transparency Act (CTA)

Dalton: The Corporate Transparency Act was a bill passed years ago, and it's coming down to the wire. ⁸⁴If you created a new entity, you should file within 90 days, and if you're an existing entity, you have to file by January 1st. ⁸⁵The general purpose is to help combat financial crime and, in a sense, national security. ⁸⁶Some people are concerned this could be a slippery slope. ^87878787But in defense of the CTA, businesses already know who you are. ⁸⁸

If you have a bank account, I mean the government knows who you are. Like you're not off the grid. And if you think you are off the grid, you're delusional. ⁸⁹

If you used LegalZoom to create your legal entity, if you have a phone number, an email, a bank account, the government knows who you are. ⁹⁰You're not off the grid. ⁹¹If you think you are, you're delusional. ⁹²So for that to be the complaint, I think that's invalid. ⁹³

Who Is Exempt from Filing?

Dalton: You may be asking, who is exempt? There are 23 exemptions. ⁹⁴The short and sweet answer is any exemption is mainly related to financial services. ⁹⁵So if you are regulated by the SEC, you're pretty much exempt. ⁹⁶This includes a securities reporting issuer, a government authority, a bank, a credit union, an investment banker, an investment company, a venture capitalist, an accounting firm, a public entity, tax-exempt entities, or a large operating company. ⁹⁷Unless you are a licensed investor or accountant or a public entity, you need to file. ⁹⁸It's pretty much everyone besides the large financial services industry. ⁹⁹

The Legal Challenges and Conflicting Rulings

Dalton: There have been a couple of legal challenges from various states, the main one being Texas. ¹⁰⁰The Texas legal case said the CTA was unconstitutional, and there's a preliminary injunction which stops the enforcement of the BOI. ¹⁰¹The DOJ has an appeal which is still pending. ¹⁰²We don't necessarily know what's going to happen. ¹⁰³This could keep escalating up the circuit and eventually get to the Supreme Court. ¹⁰⁴

There are other cases too. The National Business Small Business Association versus Yellen in Alabama ruled that the CTA is unconstitutional. 105Texas Top Shop versus Garland issued a nationwide preliminary injunction against the CTA. 106But then in Oregon, Firestone versus Janet Yellen upheld the CTA and said it was constitutional. 107So there are conflicting rulings. 108

The Constitutional Arguments Against the CTA

Dalton: The states filing against the government are saying it's a violation of the First, Fourth, and Tenth Amendments. ¹⁰⁹The First Amendment argument is that it removes people's freedoms of speech and association. ^110110110110I can see how it could get down a path where they are looking for certain groups associated with companies and then targeting them. ¹¹¹The Fourth Amendment is related to unreasonable searches and seizures, saying that requiring personally identifiable information without suspicion is an unreasonable search. ¹¹²The one that makes the most sense to me is the Tenth Amendment. ¹¹³They're saying that since this law regulates interstate commerce, it infringes on state's rights and that falls under state jurisdiction. ¹¹⁴It's an overstep by the federal government. ¹¹⁵

Should You File Even Though It's Optional?

Dalton: The general sense is we don't know what's going to happen. ¹¹⁶I was just going to file it and get it over with. ^117117117117They came out with a report today that they officially delayed the January 1st deadline, so right now it's optional to file. ¹¹⁸If you don't want to, you're not required to until otherwise stated. ¹¹⁹But I don't really see why it would be a big deal to file. ¹²⁰Companies already know that I own a business. ¹²¹ They're sending me mail, they know my name. The government probably knows who I am too. ¹²²I don't think it's a secret and I'm not doing anything wrong, so I don't really see the issue. ¹²³

If you're asking the question, do you need to file? I would just say file because if you don't know, you don't know. And if you don't know, then you definitely need to file. ¹²⁴

The Practical Impact on Your Business

Dalton: Could it be a financial or compliance burden? I don't think so. ¹²⁵It's very simple and would take you about three minutes if you already had your docs put together. ¹²⁶It's quite streamlined. ¹²⁷I think the only thing that would make it more business-friendly is if the link to submit the form worked. ¹²⁸You can't submit to the government at the moment because their link doesn't work. ¹²⁹

We spoke about TD Bank's financial crimes, what businesses are exempt, and the consequences that I think are way overboard. ^130130130130I hope that you think this episode was interesting and practical. ¹³¹What are your thoughts about TD Bank, the CTA, and the BOI filing? ¹³²How are you reacting to this as a business owner? ¹³³

Tune in next episode, we are going to be talking about AI analyst agents. ¹³⁴I'm excited to talk about something I've been waiting to do for a while, and I've got some materials to demo. ¹³⁵Very exciting stuff from Google. ¹³⁶Please tune in and have a good day, a good night, or good afternoon, wherever you are in this world. ¹³⁷

RESOURCES MENTIONED

• Financial Crimes Enforcement Network (FinCEN)
• TD Bank
• Capital One
• Wells Fargo
• LegalZoom
• Apple
• OpenAI
• Google Gemini

INDEX OF CONCEPTS

Beneficial Ownership Information (BOI), Corporate Transparency Act (CTA), FinCEN (Financial Crimes Enforcement Network), Department of Justice (DOJ), TD Bank, Capital One, Wells Fargo, Securities and Exchange Commission (SEC), National Business Small Business Association v. Yellen, Texas Top Shop v. Garland, Firestone v. Janet Yellen, First Amendment, Fourth Amendment, Tenth Amendment, LegalZoom, Apple, OpenAI, Google Gemini, AI Analyst Agents