The Corporate Transparency Act (CTA), which forms part of the Anti-Money Laundering Act of 2020, has enacted a new requirement for certain business entities, colloquially referred to as “Reporting Companies,” to disclose beneficial ownership information (BOI) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The requirements of this monumental act officially took effect in 2021.
Explained comprehensively by McGuireWoods LLP, this represents an enhancement in regulatory oversight meant to help curb illicit activities such as money laundering and tax evasion often facilitated by the opacity of entity ownership structures.
In essence, the term “beneficial owner” is defined under the CTA as an individual who, directly or indirectly, holds a substantial control over an entity, or owns 25% or more of the entity’s ownership interests. Reporting Companies are required to submit a report to FinCEN including specifically identifying information for each individual considered as a beneficial owner. This information includes, but is not limited to, the person’s full legal name, date of birth, residential or business street address, and a unique identification number from acceptable identification documents.
Though the CTA represents progress in regulatory transparency, it also introduces reporting complexities for business entities. Legal professionals and corporate entities alike should be geared up to navigate these changes, and advise on maintaining compliance with the new legislation.