What is The Corporate Transparency Act (CTA) and the FinCEN beneficial ownership rule?
Put simply, the Corporate Transparency Act (CTA) and the Financial Crimes Enforcement Network (FinCEN) beneficial ownership rule are relatively new rules that represent significant advancements in the fight against illicit financial activities. These regulations aim to eliminate the anonymity that certain business structures historically provided, which was often exploited for illegal activities like money laundering.
The CTA, effective from 2021, requires many types of companies in the U.S. and globally to report the real, or "beneficial," owners of the company to FinCEN. This move is designed to peel back layers of corporate secrecy, revealing the individuals who actually control these entities.
Additionally, the FinCEN beneficial ownership rule places a duty on banks to identify and verify the beneficial owners of their business customers. This requirement ensures that businesses cannot evade scrutiny by simply switching financial institutions. Together, these rules make it harder for people to use businesses to hide illegal activities.
What does it mean for business owners?
The implications of the CTA and the FinCEN beneficial ownership rule significantly influence the operational landscape for business owners. By obligating companies to disclose their beneficial ownership information, the CTA makes it impossible for businesses to function behind veils of secrecy. Failure to comply can result in substantial fines and even criminal charges, underscoring the need for businesses to adapt to these new requirements.
CTA and FinCEN require certain businesses such as limited liability companies, C-corporations, and S-corporations to report their beneficial owners to FinCEN. A Beneficial owner is typically defined as an individual who exercises substantial control over a company or owns or controls a significant percentage of the ownership interests. Businesses must ensure that the information they provide to FinCEN is accurate and up to date. There are certain types of companies that may be exempt from these requirements. Requirements and more information can be found here.
These regulations highlight the complexity of federal rules governing business operations. To navigate this intricate landscape successfully, it is crucial for business owners to seek guidance from professionals, such as attorneys. These experts can provide in-depth understanding and advice, ensuring businesses remain compliant and safeguarded against inadvertent legal missteps or violations. We would love to help you ensure your Beneficial Ownership Information Report is filed accurately. Contact us today.