Congress enacted the CTA in 2021 to provide information about certain entities, their owners, management, and individuals to fight money laundering, tax fraud, and other illegal activities.
The CTA requires reporting companies to provide specific information about the entity, beneficial owners, and company applicants to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
Who Needs to File?
Under the CTA, reporting companies are identified as either domestic or foreign:
- Domestic reporting companies represent corporations, LLPs, or similar entities that were created by the filing of a document with a secretary of state or any similar office under the law of a state.
- Foreign reporting companies are corporations, LLCs, or other similar entities formed under the law of a foreign country that is registered to do business in any state by the filing of a document with a secretary of state or any similar office.
Twenty-three categories of companies are exempted from filing beneficial ownership reports under the CTA. Among others, these entities include securities issuers, domestic governmental authorities, banks, insurance companies, public utilities, and public accounting firms.
Reporting companies must report to FinCEN certain information on the company such as legal name, trade names, jurisdiction of formation, and identification numbers.
Furthermore, specific information on each beneficial owner and company applicant of the reporting company must be provided.
The CTA is effective on January 1, 2024. Reporting companies existing prior to 2024 must file their initial reports within one year of the effective date. Reporting companies created or registered in 2024 must file a report within 90 days after receiving notice of their creation or registration. Reporting companies created or registered on or after January 1, 2025, must file a report within 30 days after receiving notice of their creation or registration.
Violations and Penalties
Noncompliance with the CTA’s reporting requirements can result in significant penalties and the possibility of imprisonment. Fines range from $500 per day up to $10,000 and imprisonment of up to two years.
Questions? Contact your IMC professional for all your needs.