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The Corporate Transparency Act Desk Book: Practical Guidance for Beneficial Owners and their Professional Advisors
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Abstract
The Corporate Transparency Act requires certain corporations, limited liability companies, limited partnerships, statutory trusts and other similar entities (including both privately held and non-profit business entities), designated as reporting companies, to report their direct and indirect natural person beneficial ownership information to the Financial Crimes Enforcement Network within the U.S. Department of Treasury. Certain categories of entity attributes are expressly exempted from the CTA’s reporting requirements, but the vast majority of businesses operating in the U.S. are not so exempted. FinCEN estimated over 37 million reporting companies would be required to report in the first compliance year alone.
The information to be reported under the CTA is referred to as beneficial ownership information, and is reported into FinCEN’s beneficial ownership secure system through filing a beneficial ownership information report via an online portal. The collected information includes personal identifying information about specific individuals directly or indirectly associated with the reporting company. Collected information is maintained by FinCEN and made accessible to authorized users of FinCEN’s beneficial ownership information technology system, which include certain governmental agencies, domestic and foreign law enforcement and, in some instances, financial institutions, each upon strict terms of use. Importantly, the collected information is not available to the general public, is not available to the press through Freedom of Information Act requests, and may only be accessed and used for proper purposes by authorized governmental (including law enforcement) and financial institution recipients. Significant penalties, including steep fines and significant federal prison terms, exist for violators of the permitted access requirements. Fines also exist for direct and indirect violators of the CTA’s reporting obligations, along with federal prison terms for willful violation of the CTA.
The CTA is intended to serve the public interest by combatting the use of “shell” companies in the commission of money laundering, financial fraud and other domestic and international illicit activity and corrupt practices. However, the reach of the CTA is much broader, and includes business insiders and affiliates, service providers, financial institutions, state and tribal government agencies and law enforcement, and others dealing with many U.S. entities and U.S. operated international business entities, including business entities in existence prior to and formed after the CTA’s enactment.
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Date
2024-10-21
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University of Kansas