At the start of the new year, the U.S. Senate voted to override former President Trump’s veto of the National Defense Authorization Act of 2021. With this development, important amendments to the United States anti-money laundering law (AML) took effect. Among these regulations is the Corporate Transparency Act (CTA), which is a set of important provisions designed to discourage “shell” companies and reduce corporate corruption in all sectors.
One of the most significant provisions included in the CTA is the requirement that all businesses file beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN). This fundamental transparency stops criminals and illegitimate entities from using anonymous shell companies to hide illegally gained funds.
Key Provisions of the CTA
Under the CTA, businesses operating in the United States must submit the following information every year for each beneficial owner to the FinCEN:
- Legal name;
- Date of birth;
- Address; and
- Unique identification number, such as information from a driver’s license or passport.
It is worth noting that while reporting this information to the FinCEN is mandatory, there are strict rules about how this data is stored, used, and distributed. While banking and government agencies are permitted to access beneficial owner records, the general public is not.
Several types of employees are exempt from being beneficial owners. Most beneficial owners are individuals who directly or indirectly maintain substantial control over the business or own or control at least 25 percent of the ownership interests in a business.
Does the CTA Apply to Every Business?
The CTA applies to corporations, limited-liability companies (LLCs), other related entities, and new businesses as they form. Large companies, which are generally already heavily regulated and currently reporting to other government agencies, may be exempt from the CTA. Exempt businesses include those with more than 20 employees with revenues over $5 million, most financial institutions, including banks and credit unions, and churches and other nonprofit organizations.
What Does the CTA Mean for My Business?
Businesses that do not comply with CTA provisions face civil penalties of up to $500 per day until compliance is met and criminal fines of up to $10,000 and possible jail time. For this reason, it makes sense for every business owner to consult with a skilled business attorney in their area.
An experienced business attorney can explain the CTA in great detail, help with business tort litigation matters, assess how their client is impacted by the new transparency guidelines, and take steps to ensure they are in full compliance going forward.
Philadelphia Business Attorneys at Sidkoff, Pincus & Green P.C. Ensure Clients Comply with Regulations and Avoid Costly Penalties
There is always a learning curve when it comes to understanding and implementing new business regulations. A seasoned Philadelphia business attorney at Sidkoff, Pincus & Green P.C. can take the guesswork out of navigating new legislation so you can focus on growing your business. To learn more about your case and an initial consultation, call us at 215-574-0600 or contact us online. Based in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.