The Corporate Transparency Act (CTA) went into effect Jan. 1. This means that many companies must now report to the US Treasury’s Financial Crimes Enforcement Network (FinCEN) information “about the individuals who ultimately own or control them,” as FinCEN puts it.
The new mandate is intended to catch bad actors who “seek to conceal their ownership of corporations, limited liability companies, or other similar entities in the [US] to facilitate illicit activity” such as money laundering, tax fraud, and terrorism financing, among other nefarious schemes, according to the law.
Criminals hiding—and benefitting from—ownership of US business entities “is a widely used tactic that affects national security and economic integrity,” according to the US Chamber of Commerce.
Who does this law cover, what must be disclosed, and who can access this information? With the CTA now the law of the land, companies must disclose to FinCEN information about their “beneficial owners,” including personal details like name, date of birth, home address, and a photograph, according to law firm Polsinelli.
Additionally, the rule requires company information such as legal name and trademarks, its main address (or the site of US operations if the company is based internationally), taxpayer identification number, and where the entity was created or registered, according to the US Chamber.
A beneficial owner is someone who has considerable control over the company in question or owns or controls at least 25% of the company’s ownership interests, according to the CTA. Polsinelli noted that the CTA considers every senior officer of a business to have “substantial control,” meaning the reporting company must disclose all their information to FinCEN, too.
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FinCEN will store this information in a secure database, but the information will not be publicly available. The enforcement agency noted it will permit federal, state, local, and tribal officials to obtain ownership details “for authorized activities related to national security, intelligence, and law enforcement.” Banks may also access the information under certain circumstances, so long as the reporting company consents.
What should the CFO keep in mind about reporting this information? The US Chamber noted various deadlines to file beneficial ownership information. Companies established before Jan. 1 have until Jan. 1, 2025, to file. Those created within that yearlong time frame have 90 days from formation to file. Companies created on or after Jan. 1, 2025, will have 30 days to submit their ownership information.
Of course, companies will be required to update this information with FinCEN in certain situations. They include, among other things, when a new beneficial owner comes into the picture, or if an existing owner changes their name or address, Roger Harris, president of Padgett Business Services, told the US Chamber.
Harris recommended businesses work with an attorney or an accountant when filing or updating their beneficial ownership information with FinCEN. “It may not be difficult to complete the forms, but with everything a small business owner must do to operate a successful business, I fear this is something that could be missed or not done [promptly],” he told the US Chamber.
You can reference FinCEN's electronic filing system on its website.