This information is as of December 6, 2023 and is subject to additional guidance and updates from FinCEN.
The Corporate Transparency Act (CTA) represents a significant overhaul of the U.S. anti-money laundering (AML) framework and a shift in U.S. corporate law. The CTA establishes beneficial ownership reporting requirements for many private companies operating in the United States and directs the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) to create a secure, centralized, non-public database of beneficial ownership information (BOI) to aid law enforcement in countering illicit financial activity, which may be conducted through opaque ownership structures such as shell and front companies.
What entities are required to report under the CTA?
The CTA applies to “reporting companies,” broadly defined to include U.S. corporations, limited liability companies, entities that are created by a filing with a Secretary of State or similar office under the law of a state or Indian tribe, and foreign legal entities registered to do business in the United States. However, 23 types of entities are exempt from the BOI reporting requirements, including publicly traded companies, large operating companies, banks, insurance companies, registered investment companies and advisers, venture capital fund advisers, and pooled investment vehicles.
What information must be reported?
BOI reports must disclose detailed information about reporting companies’ beneficial owners and company applicants, including each individual’s full legal name, date of birth, current address, and a unique identifying number from an official document, such as a passport. Alternatively, a reporting company may provide an individual’s unique FinCEN Identifier (FinCEN ID). A FinCEN ID is available upon request to individuals. FinCEN is in the process of finalizing the required BOI Reporting and FinCEN ID Application Forms.
When must a report be filed?
Reporting companies created or registered prior to January 1, 2024 must submit their initial BOI report by January 1, 2025. Currently, companies created or registered on or after January 1, 2024, must file initial reports within 30 days following their creation or registration. However, FinCEN has recently proposed an amendment to extend this reporting window to 90 days for companies created or registered on or after January 1, 2024, but before January 1, 2025. The amendment is expected to become final in November or December 2023. Any subsequent changes to reporting companies’ BOI must be reported to FinCEN within 30 days.
Who is a beneficial owner?
A “beneficial owner” is any individual who, directly or indirectly, either exercises substantial control over the reporting company (e.g., senior officers, board, and other important decision-makers) or owns or controls at least 25% of its ownership interests (e.g., holders of equity, voting rights, or capital or profit interests).
Who is a company applicant?
A reporting company created or registered on or after January 1, 2024, is also required to disclose up to two “company applicants.” A company applicant is any individual who (1) directly filed the documents to form the company or register it to conduct business in the United States, and (2) had primary responsibility for directing or controlling the filing when multiple individuals were involved in filing the documents. Company applicants may include attorneys, paralegals, accountants, or third-party filing service providers. If a reporting company was created or registered before January 1, 2024, it is not required to report information with respect to any company applicant.
Who can access BOI reports?
Although FinCEN is still developing the rules that will govern access to BOI, the agency intends to maintain a Beneficial Ownership Secure System (BOSS) database to protect this information. FinCEN may disclose reported BOI to a statutorily defined group of governmental authorities and financial institutions in limited circumstances.
What will the BOSS look like?
FinCEN has expressed an expectation that BOI reports will be submitted electronically as well as an understanding that, in certain circumstances, a reporting company may be unable to file through the BOSS. FinCEN will secure this web portal to the highest information security protection level provided under the Federal Information Security Management Act and will segregate BOI from FinCEN’s existing Bank Secrecy Act (BSA) database. FinCEN will provide a high-level overview of the BOSS once the BOI access rule has been finalized.
What’s next?
Private companies doing business in the United States should immediately seek to determine their reporting obligations (if any) under the CTA. While FinCEN will not accept BOI reports before January 1, 2024, reporting companies should begin collecting information now so that they are prepared to submit within the appropriate timeframe.
