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Industry Update Corporate Transparency Act 2000X1000

Learn more about the Corporate Transparency Act

Friday, May 17, 2024

Learn more about updates to the Corporate Transparency Act, including who is subject and what must be reported.

The Corporate Transparency Act

The Corporate Transparency Act (the “CTA”) was enacted as part of the Anti-Money Laundering Act of 2020. As a result of the CTA, entities subject to it must file a Beneficial Ownership Report (“BOI”) within certain timeframes, as set out in the CTA.

To enact the CTA, the Financial Crimes Enforcement Network (“FinCEN”) issued guidance designed to help clarify what the extensive reporting provisions require. FinCEN has published a Small Entity Compliance Guide (Small Entity Compliance Guide | and FAQs (Beneficial Ownership Information | regarding the scope.

FinCEN issued a Final Rule on September 29, 2022, to implement the reporting provisions of the CTA. Since that date, FinCEN has promulgated additional regulations amending the Final Rule and further implementing the CTA. The additional regulations, among other things, extended the deadline for the filing of the initial BOI reports and detailed how the information included in the BOI reports may be shared with foreign governments, other branches of the U.S. government, and financial institutions, and how information shared will be protected.

What are the requirements under the CTA?

  • Entities subject to the CTA, and formed or registered before January 1, 2024 to do business in the United States must file their initial BOI report no later than January 1, 2025.
  • Entities subject to the CTA, and formed or registered after January 1, 2024 and before January 1, 2025 to do business in the United States must file their initial BOI report within 90 calendar days of formation or the registration becoming effective.
  • Entities subject to the CTA, and formed or registered after January 1, 2025 to do business in the United States must file their initial BOI report within 30 calendar days of formation or the registration becoming effective.

Who is subject to the CTA?

“Reporting companies” are defined as those domestic or foreign corporations, limited liability companies, or other entities who are formed, or in the case of foreign entities, registered to do business in any U.S. state or tribal jurisdiction, by the filing of a document with the appropriate state or tribal authority.

There are certain entities who are exempt from reporting. These include:

  • Companies registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, the Investment Company Act of 1940, or the Investment Advisers Act of 1940.
  • Companies whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities who themselves are exempt.
    • Control means “that the exempt entity entirely controls all of the ownership interests in the reporting company….”

What must be reported?

Reporting companies must disclose certain information about the reporting company itself, its beneficial owners, and for companies formed after January 1, 2024, a maximum of two company applicants. The information reported about the company itself must include:

  • Full legal name and trade names or “doing business as” names
  • Current U.S. street address or primary U.S. location
  • Jurisdiction of its formation or registration
  • Taxpayer Identification Number (if a foreign entity without a U.S. Taxpayer Identification Number, a similar number issued by a foreign jurisdiction and the name of the issuing jurisdiction)

For each beneficial owner and company applicant, the reported information must include:

  • Full legal name
  • Date of birth
  • Current residential address
  • Unique identifying number from a U.S. passport, valid U.S. drivers’ license, or from a valid foreign passport
  • Scanned copy of the document from which the unique identifying number was obtained

A beneficial owner or company applicant can obtain and use a FinCEN identifier (a unique identifying number assigned to an individual who submits the same information required in a BOI report) and use that instead of submitting the personal information listed above.

Who are the Beneficial Owners?

With certain exceptions, a beneficial owner is an individual who, directly or indirectly:

  • Exercises substantial control over the reporting company
    • An individual has substantial control if the individual:
      • Serves as a senior officer
      • Has authority over the appointment or removal of any senior officer or a majority of the board of directors
      • Directs, determines, or has substantial influence over the nature or scope of the business, reorganization, dissolution, or merger of the company, major expenditures or investments, issuance of equity, incurrence of significant debt, or amendments to substantial governance documents
    • Owns or controls at least 25% of the ownership interests of the company

In a final rule issued by FinCEN to implement the access and safeguard provisions, the organization described when and how information disclosed under the CTA may be shared. Information may be shared only with the following recipients under the following circumstances:

  • Federal agencies engaged in national security, intelligence, or law enforcement activities
  • Federal functional regulators and other regulatory agencies engaged in supervisory activities with respect to regulated financial institutions
  • State, local and tribal law enforcement agencies where a “court of competent jurisdiction” has authorized the agency to seek the information in connection with a criminal or civil investigation, such as by approving the issuance of a subpoena
  • Foreign requesters where the request is made on behalf of a foreign law enforcement agency, prosecutor, judge or other competent authority, and the request satisfies certain stringent criteria
  • Financial institutions to allow the financial institution to facilitate compliance with FinCEN’s customer due diligence requirements, provided the financial institution requesting the information has the relevant reporting company’s consent
  • Treasury Department personnel for tax administration purposes or whose official duties require such access

Recipients of the information are generally prohibited from sharing the information further.

Penalties for violating the CTA include both civil and criminal penalties. Civil penalties are up to $500 for each day a violation continues or has not been remedied. Criminal violations of the CTA include fines up to $10,000, imprisonment for up to two years, or both.

Companies subject to the CTA should ensure they have systems and processes to identify, retain, and keep current the information required to file a BOI report, and to file BOI reports timely. Updated or corrected BOI reports must be filed within 30 days of any changed information.

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