Overview: Implementation of the Corporate Transparency Act ~ Jan. 1, 2024
Overview:
The CTA mandates that certain business entities, defined as “reporting companies,” must disclose information regarding their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
Purpose of the CTA:
To eliminate the veil of anonymity behind which entities such as anonymous shell companies operate, often used for money laundering, financing terrorism, and other illicit activities. By shifting the responsibility of information collection from financial institutions to the companies themselves, the CTA intends to bolster the transparency of corporate ownership and control.
Definition of a Reporting Company:
Reporting companies include corporations, LLCs, LPs, or similar entities either filed with a state secretary or formed under foreign laws and active in the U.S.
Information Disclosure Requirements:
CTA requires reporting companies to provide beneficial ownership information, including the legal name, date of birth, address, and an identifying number from a government-issued document or a FinCEN identifier for each beneficial owner and applicant.
Identification of Beneficial Owners:
Beneficial owners are individuals who either substantially control the entity or own or control more than 25% of its ownership interests.
Access to Beneficial Ownership Information:
Beneficial ownership information is meant to be confidential, accessible only under specific circumstances, such as by federal law enforcement for security or investigation purposes, or by financial institutions with company consent for customer due diligence.
Penalties for Non-Compliance:
- Civil fines of up to $500 daily
- Criminal fines of up to $10,000,
- Imprisonment for up to 2 years.
A safe harbor provision allows for correction of submitted information within 90 days under certain conditions without penalty.
Applicant Definition and Filing Timeline:
An applicant is an individual who files to form or register a business entity under U.S. or foreign laws. Entities in existence before January 1, 2024, have until January 1, 2025, to file initial reports, while those formed or registered afterward have 30 days post-creation or registration. Any changes to reported information must be disclosed within 30 days of occurrence.
This is NOT that big of a concern!
Information will NOT be publicly disclosed!
More information will be release, including the forms, as we get closer to the end of 2023.
