The Financial Crimes Enforcement Network (FinCEN) has published another rule, implementing Section 6403 of the Corporate Transparency Act (CTA)
When you read news stories about financial crimes and business corruption, you might get the impression that businesses can get away with anything. It seems like banks will lend them huge sums of money after asking a few questions about what they will do with the money.
A new federal law aims to increase business transparency by forcing the corporations to identify their decision-makers. To find out whether your company is required to submit a report to the Department of the Treasury under the new Corporate Transparency Act, to comply with this law, and to exercise the rights that it grants you as a business owner, contact a business law attorney.
What is the Purpose of the Corporate Transparency Act?
The Corporate Transparency Act is a federal law that requires businesses to disclose the identities of their owners to the Department of Treasury. The Financial Crimes Enforcement Network (FinCEN) has published a final rule that will become effective on January 1, 2024
The CTA aims to prevent money laundering and other financial crimes; it accomplishes this by making it difficult for individuals and companies to use “shell corporations,” which conceal their purposes, and sometimes even the identities of their owners.
The CTA requires US domestic entities and foreign companies registered to do business in any US state to submit a report to the Department of Treasury listing the beneficial owner(s), who is each person who owns 25% or more of the company and each person who is exercising substantial decision-making power on its behalf, even if that person is not an owner. The information collected is going to be maintained in the newly created Beneficial Ownership Secure System (BOSS).
The report must list the full legal name, address, Tax I.D. number, and government-issued ID number of each beneficial owner. (A government-issued ID number can be a driver’s license number, passport number, or the “A” number appearing on a person’s green card, to name just a few examples.)
A new report must be submitted every time the information in the report changes, such as if the company takes on a new partner or if one of the owners moves to a new address. There are several exemptions provided by the final rule issued by the FinCEN, the most significant one is the one for “large operating companies”, which are considered those with 20 or more employees and annual gross receipts exceeding $5 million.
What the CTA Means for Your Company and its Business Transparency
It means that the Department of Treasury might know more about you and your company than it previously knew. It is not, however, an identity theft feeding frenzy. The Department of Treasury may only disclose the information to an interested party at the request of a law enforcement entity, federal agency, judge, or prosecutor in the United States or certain foreign countries.
When Are Reports Due?
Domestic reporting companies created before January 1, 2024 and entities that became foreign reporting companies before January 1, 2024, will have until January 1, 2025 to file an initial report. Domestic reporting companies created after January 1, 2024, and entities that became foreign reporting companies after January 1, 2024, will have to file an initial report within 30 days after their formation or registration
What Are the Penalties for Noncompliance?
Noncompliance with the reporting requirements — including failing to report complete or updated beneficial ownership information as required or reporting false or fraudulent information — can trigger a civil penalty of up to $500 per day and criminal penalties, including up to $10,000 in fines, imprisonment for up to two years, or both.
How Your Attorney Can Help You Comply With the CTA
The best way to ensure that your company is properly complying with the CTA is to work with a business attorney in New York on the report that you send to the Department of Treasury this year. You will also need a New York business lawyer if you become involved in a business dispute investigation in which CTA disclosures are involved.
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