Up to $250,000 in fines and 2 years in jail are the potential penalties for an HOA board member who willfully does not comply with new federal reporting requirements. In the above interview, Ronald J. Barba, a Managing Partner with Bender, Anderson, and Barba, P.C., provides background on FinCEN (Financial Crime Enforcement Network) and what it means for homeowners associations (HOAs) and their respective boards. 

Time’s ticking as HOAs and their Beneficial Ownership Interests (board members) must file by December 31st, 2024. That may sound like a long time, but individual reticence to filing and HOA’s bylaws may be sticking points to complying with this federal law.

As background, the mission of FinCEN, which is part of the Department of Treasury, is to 

“…safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorism, and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.”

FinCEN Mission

To achieve its mission, FinCEN requires every business registered with a state Secretary of State to file a beneficial ownership information statement with FinCEN. As Barba points out, this is also a requirement for almost all of the nation’s 300k+ HOAs (the larger ones are exempt, as they have different reporting requirements).

Get the Board on Board or Else…

In his presentation at the 2024 CAI (Community Association Institute) Annual Conference & Exposition, Barba gave FinCEN kudos for designing an easy-to-use website for the organization and its senior officers to complete the form. The sticky point may not be the ease of use, but the reluctance of some board members to upload a government-issued document with their image (e.g. driver’s license) to a federal database. 

If a board member refuses to complete the form, he runs the risk of the previously mentioned penalties. This could also impact the HOA with similar penalties depending on the circumstances. If the bylaws do not include a provision that a board member must comply with FinCEN, then it might be impossible for the board to remove the non-compliant board member. This situation could put the HOA in legal and financial jeopardy.

There is also a requirement that the FinCEN form must be updated within 30 days of a change to a board’s composition. This doesn’t sound like a big deal, but it could be in those cases where a board member verbally resigns, but it isn’t a clear-cut resignation. 

This author’s takeaways from the above conversation and the CAI panel on this topic:

• Ensure your HOA’s bylaws require FinCEN compliance (as well as all other legal compliance) as a qualification for a board position.
• Require resignations to be in writing.
• Consider a Chief Compliance Officer as a board position.