By Murphy Ray Jr., FORVIS s a financial institution (FI), you are exempt from the Corporate Transparency Act (CTA). However, many of your business customers are not. It is important for you, as their FI, to initiate a conversation regarding what the CTA is, how it will affect your customers, and any future penalties for noncompliance. By having these conversations with customers today in preparation for mandated reporting beginning Jan. 1, 2024, you can help save them and your institution time and money. What Is the CTA? The CTA was passed in 2020 as part of the Anti-Money Laundering Act of 2020. The CTA establishes uniform beneficial ownership information (BOI) reporting requirements for certain types of corporations, limited liability companies (LLCs), and other similar entities created in or registered to conduct business in the United States. Under the CTA, a reporting company must report certain beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), referred to as BOI reporting provisions. The CTA authorizes FinCEN to collect that information and disclose it to authorized governmental authorities and financial institutions, subject to effective safeguards and controls. The goal is to provide essential information to law enforcement, national security agencies, and others to help prevent criminals, terrorists, proliferators, and corrupt oligarchs from hiding illicit money or other property in the United States. What Companies Must Comply with CTA? The rule identifies two types of companies subject to the reporting provisions: a domestic reporting company and a foreign reporting company. A domestic reporting company is a corporation, LLC, or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or tribe. A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. FinCEN expects that these definitions of reporting companies will encompass limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships, in addition to corporations and LLCs, because such entities are generally created by a filing with a secretary of state or similar office. Under the rule, and in keeping with the CTA, 23 types of entities are exempt from the definition of “reporting company,” such as SEC filers, banks, credit unions, insurance companies, accounting firms, and, most notably, what is called a “large operating company.” A large operating company is defined as a company that employs more than 20 full-time employees in the U.S., has an operating presence at a physical office in the U.S., and filed a federal tax or A The CTA and its subsequent rules present significant updates to the U.S. anti-money laundering laws. Corporate Transparency Act 34
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