The American Institute of CPAs’ member insurance program underwriter, CNA,
An estimated 33 million businesses, primarily small companies, are required to file the complex and confusing new reports. Beginning Jan. 1, 2024, these businesses must comply with the Corporate Transparency Act by filing beneficial ownership information reports. The new legal and reporting requirements are part of U.S. anti-money laundering regulations included within the National Defense Authorization Act.
Failure to accurately and timely file will result in significant penalties from the Treasury Department’s Financial Crimes Enforcement Network, including $10,000 in civil fines and/or up to two years in prison.
But many accounting firms have been reluctant to offer advisory and compliance services for BOI reporting to clients, fearing such services would not be covered by their professional liability insurance. The announcement by the AICPA and CNA will be a game changer for CPAs as the go-to trusted advisor for small businesses. Accounting firms now can feel somewhat more secure in expanding their practices to include BOI reporting services.
However, as in many things, there is a caveat. Individual state bar associations ultimately determine what they consider to be the “unlicensed practice of law.” Thus far, not one state has ruled that BOI-related services are considered UPL. Of course, that doesn’t mean one or more won’t rule to the contrary at some time in the future. In its announcement, CNA did say that if a state bar does determine it is UPL in the future, work done before such a determination will be covered as professional services.
AICPA & CIMA CEO Barry Melancon said such services are a “component part of what a CPA practice looks like, and it should be covered.” The CNA announcement makes clear these services will be covered under the same terms and conditions as other appropriate CPA services.
After CNA announced it will cover BOI reporting services for AICPA members, many believe that other insurance companies providing similar insurance for non-AICPA member firms will follow suit.
A few points to bear in mind:
- If you choose to offer BOI assistance to clients, what do you need? You will need a separate engagement letter. The AICPA and several of us are working with CNA and AON (insurance provider of risk solutions to AICPA members) on a template for such an engagement letter that will be available in the coming weeks.
- What happens if state bar associations determine BOI work is the unauthorized practice of law? Each individual state bar determines what is UPL, and none has said that BOI work would constitute the unauthorized practice of law. Melancon says there’s “pretty strong evidence that that’s probably not going to be the outcome.” That is also the belief of many I have spoken with at the American Bar Association and a number of state bar associations. Again, there are no guarantees here, and accounting firms should closely monitor developments. And if a state bar later determines that BOI work is the unauthorized practice of law, then CNA says its insurance would consider any work done before that date as covered professional services.
- What is not covered by professional liability insurance? As is the case with all professional liability insurance coverage for accounting firms, CNA makes clear that any activity that is dishonest, fraudulent, criminal and/or illegal is not covered.
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