Financial Crime World

New Corporate Transparency Act: Enhanced Financial Crime Reporting in the US

The United States is taking strides to enhance financial crime reporting and bring more transparency to American businesses with the Corporate Transparency Act (CTA). The Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury is set to implement new reporting requirements under this Act.

Overview of the Corporate Transparency Act

Passed in January 2021, the CTA mandates reporting of beneficial ownership information by specific entities to FinCEN. This regulation aims to provide law enforcement with better tools to:

  • Track down illicit financial transactions
  • Prevent money laundering
  • Combat terrorist financing
  • Mitigate other financial crimes.

Key Components of the Act

reporting entities will be required to submit the following information to FinCEN:

  1. Beneficial Owners’ Information: The names, birthdates, and addresses of all individuals who either:
    • Directly or indirectly own at least 25% of a company’s equity, or
    • Control more than 25% of its voting rights.
  2. Entitiy and Owners’ Addresses: Residential and/or business street addresses for the reporting entity and the individuals mentioned above.
  3. Reporting Timeline: There are no specific deadlines mentioned yet, but reporting entities will need to provide this information when they’re formed and at various times during their existence. Also, updates are required when there are changes to their beneficial owners or ownership information.

Reporting Entities and Compliance

The following entities are considered reporting entities under the CTA and will be subject to the new reporting requirements:

  • Corporations
  • Limited Liability Companies
  • Other entities created by filing a document with the Secretary of State or similar agency.

Consequences of Non-Compliance

failure to comply with the CTA may result in:

  • Civil penalties
  • Criminal penalties, including fines and imprisonment for up to two years.

Upcoming Developments

FinCEN is expected to establish a system for reporting entities to submit their beneficial ownership information. Further details on the implementation and reporting deadlines will be announced in the future.

The CTA is in line with international efforts to counter financial crimes and promote transparency. It also aligns the United States with global standards:

  • EU’s Fifth Anti-Money Laundering Directive (5AMLD)
  • Other similar regulations in various countries.

This significant step towards financial transparency, economic growth, and a robust financial system is expected to provide extensive benefits for the country.