COMPLIANCE
Key Considerations for In-House Counsel under the Corporate Transparency Act By LYDIA DUYNSTEE UNDERSTANDING THE CORPORATE TRANSPARENCY ACT
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n recent years, there has been a growing focus on corporate transparency and the need to combat illicit activities, such as money laundering and terrorism financing. In response to these concerns, on January 1, 2021, Congress enacted the Corporate Transparency Act (CTA or the Act), as part of the National Defense Authorization Act. The Act will take effect on January 1, 2024. The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), the group in charge of implementing the law, estimates that approximately 32.6 million existing companies will be impacted in 2024, with an additional five million new reporting companies impacted every year thereafter. In October 2023, Wolters Kluwer, a global leader in compliance,
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released the results of its survey on the new beneficial ownership information (BOI) reporting rule under the Act. The findings show that 74% of U.S. businesses subject to these new regulations are unaware of these obligations and unsure how they will comply with the new rules. Furthermore, 46% of law firms and certified public accountant firms responded they are unaware of the new BOI reporting requirements. The CTA brings about significant operational considerations for corporate law departments, necessitating a proactive approach to compliance and entity management. By understanding the Act’s BOI reporting rules, corporate law departments can adapt their procedures and leverage technology to thrive in an evolving regulatory landscape.
JANUARY 2024
The CTA aims to create a comprehensive federal beneficial ownership registry, requiring certain corporations, limited liability companies, and other similar entities to disclose information about their ultimate beneficial owners. Reporting companies created in the United States before January 1, 2024 must report company and BOI details to FinCEN by January 1, 2025 within its secure “BOSS” database. Reporting companies created on or after January 1, 2024 and before January 1, 2025 must submit the report to FinCEN within 90 calendar days of receiving notice of their creation. Starting January 1, 2025, the reporting window is reduced to within 30 calendar days of receiving notice of creation. (Reporting companies formed under the law of a foreign country and registered to do business in the United States are also required to file a report, however this article is dealing with domestic reporting companies only).
IDENTIFYING COVERED ENTITIES One of the initial tasks for in-house counsel is to determine whether BACK TO CONTENTS
