The Corporate Transparency Act (CTA) is a significant federal law passed as part of the National Defense Authorization Act of 2021. It requires businesses to disclose their beneficial owners to assist in detecting money laundering, terrorism financing, and other illegal activities.
Effective from January 1, 2024, new and existing business entities (with exceptions) must comply with the CTA. The legislation defines beneficial owners as individuals with substantial control or ownership of 25% or more equity interests.
Key Aspects:
Reporting Requirements: “Reporting companies” must provide beneficial ownership information to FinCEN.
Timeline: Reporting companies must submit information within a year of January 1, 2024, with updates within 90 days of changes. Companies formed in 2024 have 90 days from the date of information to comply with these rules.
Privacy: Information submitted remains confidential to protect individual privacy.
Additional Information:
Apart from beneficial ownership, the CTA mandates disclosure of individuals involved in creating new entities after the effective date.
Objectives:
The CTA aims to establish federal standards for incorporation, protect national security interests, and ensure compliance with international anti-money laundering standards.
Non-Compliance Penalties:
Penalties for non-compliance include daily fines, civil fines, and criminal penalties for unauthorized disclosure or use of beneficial ownership data.
