Corporate transparency act (CTA)

 Corporate Transparency Act (CTA) is a U.S. federal law aimed at enhancing transparency and preventing the illicit use of anonymous shell companies for money laundering, terrorist financing, and other illicit activities. The CTA was enacted as part of the National Defense Authorization Act for Fiscal Year 2021 (NDAA 2021) and was signed into law on January 1, 2021. 

  Under the CTA, certain corporations and limited liability companies (LLCs) are required to report to the Financial Crimes Enforcement Network (FinCEN) information about their beneficial owners. Beneficial owners are individuals who directly or indirectly exercise substantial control over the entity or have a substantial economic interest in it.  

 Beginning January 1. 2024, covered entities must provide information about each beneficial owner, including their full legal name, date of birth, current residential or business address, and a unique identifying number from an acceptable identification document (e.g., driver's license or passport). 

 Certain types of entities, such as publicly traded companies, banks, and certain other financial institutions, are exempt from the CTA's reporting requirements. Additionally, small businesses meeting specific criteria may be exempted from some of the reporting obligations. 

 A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information. 

 The information on beneficial owners is to be reported to FinCEN through a new database that will be created for this purpose. The information is not public and will be accessible only to certain authorized government authorities, such as law enforcement agencies.