The Corporate Transparency Act (CTA) in the United States, enacted as part of the National Defense Authorization Act for Fiscal Year 2021, is a significant legislation aimed at combating money laundering, financial fraud, and other illicit activities. Here are the key aspects of the CTA:

Beneficial Ownership Information Reporting

The CTA requires certain corporations, limited liability companies (LLCs), and other similar entities to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Beneficial owners are individuals who ultimately own or control these entities.

🤵 Definition of Beneficial Owner

The Act defines a beneficial owner as an individual who, directly or indirectly, either owns 25% or more of the equity interests of the reporting company or exercises substantial control over it.

🚫 Exemptions

Certain entities are exempt from these reporting requirements, such as publicly traded companies and entities that are already heavily regulated, like banks and insurance companies.

💡 Purpose of the Legislation

The CTA aims to prevent and combat the use of shell companies for illicit activities, such as money laundering, financing of terrorism, tax evasion, and other financial crimes. By requiring companies to disclose their beneficial owners, it becomes harder for individuals to use anonymous shell companies to hide their illegal activities and proceeds.

🛠️ Implementation and Compliance

FinCEN is responsible for implementing the regulations of the CTA, including establishing the requirements for reporting, maintaining, and disclosing beneficial ownership information.

🛡️ Privacy and Access to Information

The information collected under the CTA is not publicly accessible. It can only be disclosed to authorized government authorities for law enforcement purposes, and in some cases, to financial institutions with the consent of the reporting company, primarily for due diligence purposes.

🛑 Penalties for Non-Compliance

Entities that fail to report accurate beneficial ownership information, or knowingly provide false information, face significant penalties, including fines and imprisonment.  The escalating fines range from $500 to $10,000 per violation and jail time of up to two years.

🌎 Global Impact

While it’s a U.S. law, the CTA has implications for international businesses and financial institutions that operate in the U.S., as they may need to comply with these reporting requirements.

🛈 In Summary

Overall, the CTA represents a major step in increasing transparency in business ownership and financial transactions, thereby helping to tackle financial crimes and improve national security.

Requirements of Beneficial Ownership Information

The requirements for reporting Beneficial Ownership Information (BOI) under the Corporate Transparency Act (CTA) are set to evolve in the coming years, particularly with significant changes expected in 2024 and 2025. Here’s a breakdown of these requirements:

📅 Starting in 2024

New Entities

Entities created after the effective date of the FinCEN regulations will be required to submit their BOI at the time of their formation or registration.

If your company is created or registered to do business in the United States on or after January 1, 2024, and before January 1, 2025, it will have 90 calendar days after receiving actual or public notice that the company’s creation or registration is effective to file its initial BOI report. Specifically, this 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier. If your company is created or registered on or after January 1, 2025, it will have 30 calendar days from actual or public notice that its creation or registration is effective to file its initial BOI report.

Existing Entities

Companies existing before the effective date of the FinCEN regulations will need to file their initial BOI reports.  If your company already exists as of January 1, 2024, it must file its initial BOI report by January 1, 2025.

Information Required

The report must include details such as the name, date of birth, address, and a unique identifying number (from a passport, driver’s license, or other government-issued ID) for each beneficial owner.

📆 2025 and beyond

All Entities

All existing companies existing are expected to be filed before January 1st 2025,  following the finalization of the FinCEN regulations.

Updates to Information

Both existing and new entities will be required to update their BOI within a specific timeframe (likely within a year) if there are changes in beneficial ownership.

📢 Expect Final Regulation

As last update in November 2023, the exact details and dates might still be subject to change as FinCEN finalizes the regulations. Entities potentially impacted by the CTA should keep abreast of the latest developments and seek professional advice to ensure compliance

 We are ready to help you.

MX Global is ready to help you in the necessary information reporting needs, to clients that our firm supports.  Both in the formation of new companies, as well as in the necessary reports of the operating companies that MX Global currently supports.

Please contact our professional team of advisors at info@mxglobal.center