With the Corporate Transparency Act (CTA) set to take effect on January 1, 2024, an estimated 32 million entities will soon be required to report personal information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department. While the law is aimed at curbing money laundering, terrorist financing, and other financial crimes, its broad regulations will have a sweeping impact on many companies doing business in the U.S.
Companies subject to the CTA will need to file with FinCEN a Beneficial Ownership Information Report containing the full legal name, date of birth, current residential or business street address, and an image of an acceptable identification document for each beneficial owner. More information about the CTA’s reporting requirements can be found here.
Here are some steps that companies can take to prepare for the implementation of the new regulations:
1. Review Your Corporate Structure
Review your corporate structure and identify who the beneficial owners of your company are. Generally, a beneficial owner is anyone who owns 25% or more of a company’s equity or voting rights or has substantial control over the company.
For corporations, beneficial owners can include shareholders, directors, and officers. For LLCs, beneficial owners can include members and managers.
2. Create a Beneficial Ownership Register
Once you have identified the beneficial owners, create a beneficial ownership register. The register should include the name, address, date of birth, and copy of a government-issued photo ID (such as a passport or driver’s license) of each beneficial owner.
It’s important to keep the register up to date and accurate, as inaccurate or incomplete information could result in fines or other penalties.
3. Develop a Compliance Program
Companies should consider developing a compliance program to ensure they are in compliance with the CTA. The program should include policies and procedures for identifying and verifying beneficial owners, maintaining the beneficial ownership register, reporting beneficial ownership information to FinCEN, and safeguarding the beneficial owners’ personal information collected by the company.
4. Ask for Help if Necessary
Companies may need to work with law firms to help them comply with the CTA. An attorney can help identify beneficial owners, create and maintain the beneficial ownership register, and report beneficial ownership information to FinCEN.
5. Stay Up to Date on Changes
U.S. companies should stay up to date on any changes to the CTA or FinCEN regulations. The CTA is a new law, and it’s possible that there could be changes or clarifications to the law in the future.
In conclusion, the Corporate Transparency Act represents a significant change in U.S. corporate law, and companies should soon start preparing for its implementation. By following these steps, companies can ensure they are prepared to comply with the CTA when it becomes effective in 2024.