This CLE course will provide corporate counsel with guidance on the Corporate Transparency Act of 2021 (CTA) requirements, which will create a beneficial ownership registry within the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). This new legislation requires millions of "reporting companies" to report information on their "beneficial owners" to FinCEN and sets forth both civil and criminal penalties for those owners that fail to comply.
Beginning Jan. 1, 2022, the CTA will require certain private companies to disclose their "beneficial owners" to the U.S. Department of the Treasury's FinCEN. Companies formed on or after the date regulations are adopted must report when created. Companies formed before rules are effective will have an extended period to file their initial reports. The CTA explicitly covers LLCs and corporations as well as similar entities.
The CTA defines who must report and what must be reported. The regulations are in development to determine measuring ownership, who is in control, and how to view multi-tiered companies and related parties. Rules should also address supplemental reporting when there are ownership changes or changes in control of a private company.
There are numerous exemptions for various types of organizations. Nevertheless, the CTA may create a substantial burden on investors and small business owners. Counsel must advise clients on when reporting is required and how to make proper filings
Counsel should be aware of compliance regulations because the potential penalties are substantial. In addition to fines, the CTA includes the possibility of imprisonment for filing false reports or willfully failing to file.
In December 2021, FinCEN proposed additional rules to address who must report beneficial ownership information, when they must report, and what information they must provide. Collecting this information and providing access to law enforcement, financial institutions, and other authorized users will diminish the ability of malignant actors to hide, move, and enjoy the proceeds of illicit activities. FinCEN has stated its objective to take aggressive action against those who exploit anonymous shell corporations and front companies.
Listen as our expert panel discusses compliance provisions of the CTA and best practices for businesses subject to this new law and what further steps the new administration and Congress may take related to anti-money laundering objectives.
