Approved in 2020 as part of the money laundering act, the Corporate Transparency Act (CTA) has increased reporting coverage for most corporates in the US.
The CTA emerges as a joint attempt by different government areas to combat money laundering and other illicit activities and align reporting requirements with international standards. The CTA fights against financial crimes based on a national database of the company and all those involved in its incorporation, control and ownership. This information is not publicly available, but can be accessed by regulatory agencies, banks and financial institutions.
On September 29, 2022, the Financial Crime Enforcement Network – FinCEN of the US Department of the Treasury, announced the issuance of the final rule that establishes the implementation of the CTA requirements for reporting beneficial ownership information. The act will come into force on January 1st, 2024.
Under the current rules, who will need to complete the CTA report?
Companies incorporated in the United States or in a foreign country that are registered to do business in the country must report the information. Among the companies that meet the requirements, we can mention corporations, limited companies, limited partnerships, statutory funds, among others. As for the institutions exempt from reporting, we can mention non-profit entities, large operating companies (companies with 20 or more full-time employees in the US, more than US$5 million in revenue in US and physical operating presence in the US) other businesses with specific regulations, such as utilities.
What must be reported?
The following information must be declared on Beneficial Ownership Information (BOI) reports:
Enterprises: name, business name or trade name (if any), address, jurisdiction where it was incorporated or registered and the tax identification number (TIN).
Beneficial owners (legal persons who own or control at least 25% of the shares in the company or exercise substantial control over it): name, date of birth, address, identity document and photo of the identity document.
Business applicants (any person who has registered or is registered as an entity to do business in the US): name, date of birth, home or business address, ID and photo of ID.
When will it come into force?
The act will come into force on January 1st, 2024. From that date, operating companies will have one year to declare the necessary information to FinCEN, while companies created after the publication date must comply with the new requirements within 14 days. The CTA also requires companies to file updated reports whenever there is a change in the reported information.
Failure to comply with the requirements can result in severe penalties, including fines of up to US$10,000 and imprisonment for up to two years. However, minor offences will not be penalized if they are corrected within 14 days after the discovery of the filling error and within 90 days after the discovery of report inconsistencies.
To avoid possible filling errors, the suggestion is to find a specialized accountant to help you in this process. Do you need help filling your report? Contact Drummond Advisors!