EXECUTIVE VICE PRESIDENT’S MESSAGE INDUSTRY INSIGHTS JOHN W. ANDERSON Executive Vice President New Mexico Bankers Association Corporate Transparency Act The Corporate Transparency Act (signed into law on January 1, 2021) expanded anti-money laundering laws and created new reporting requirements for certain companies doing business in the United States. Beginning in 2024, many small businesses are required to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) in an effort to create a national database for use by national security and law enforcement agencies to prevent the use of shell companies for criminal activity. Both domestic and foreign reporting companies are required to file reports. A company is considered a reporting company if a document was filed with the Secretary of State (SOS) or similar office to create or register the entity. Corporations, (including S corporations), LLCs and other entities formed through the SOS are subject to the reporting requirements. But, because sole proprietorships, trusts and general partnerships do not require the filing of a formal document with the SOS, they generally are not considered a reporting company and will not have a filing requirement. Foreign companies are required to file reports if they are registered with the SOS or similar office under state law. Some companies are exempt from reporting, but many of the exempted companies are already registered to report ownership information to a government authority. Beneficial ownership information (BOI) must be reported for the reporting company’s beneficial owners and (for entities formed or registered after 2023) company applicants. BOI includes an individual’s full legal name, date of birth, street address and a unique ID number. The unique ID number can be from a non-expired U.S. passport, state driver’s license or other government-issued ID card. If the individual does not have any of those documents, then a non-expired foreign passport can be used. An image of the document showing the unique ID number must also be included with the report. Two groups of individuals are considered beneficial owners of a reporting company: (1) any individual who directly or indirectly owns or controls at least 25% of the ownership interests of the reporting company; or (2) any individual who exercises substantial control over the reporting company. Individuals with substantial control are those with substantial influence over important decisions about a reporting company’s business, finances and structure. Senior officers (president, CFO, general counsel, CEO, CCO and any other officer who performs a similar function) are automatically deemed to have substantial control, as are individuals with the authority to appoint or remove senior officers and board members. There is no requirement that these individuals have actual ownership in the company to be considered a beneficial owner for reporting purposes. 6
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