Pub. 12 2021 Issue 4

wvbankers.org 14 West Virginia Banker Corporate Transparency Act C ongress passed the Corporate Transparency Act (“CTA”) on Jan. 1, 2021, as part of the National Defense Authorization Act (“NDAA”) for fiscal year 2021. The purpose of CTA is to “better enable critical national security, intelligence, and law enforcement efforts to counter money laundering, the financing of terrorism, and other illicit activity” by creating a national registry of beneficial ownership information for “reporting companies.” CTA requires every limited liability company, corporation, or similar entity to report the beneficial ownership of an entity to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) unless the entity qualifies for one of the CTA’s 24 exemptions. The information will not be publicly available, but FinCEN is authorized to disclose the information to the following: • U.S. federal law enforcement agencies • Certain other enforcement agencies • Non-U.S. law enforcement agencies prosecutors or judges based on a request from a U.S. federal law enforcement agency • Financial institutions and their regulators, with consent of the reporting company The CTA represents a change in the responsibilities of financial institutions. Prior to the implementation of the CTA, the burden of collecting beneficial ownership information fell on financial institutions, which are required to identify and verify beneficial owners through the Bank Secrecy Act’s customer due diligence requirements. CTA shifts that responsibility to reporting companies. Regulations The CTA requires the Secretary of the Treasury to prescribe regulations by Jan. 1, 2022. The anticipated regulations will govern the timing for filing under CTA. On April 2, 2021, FinCEN issued an advance notice of proposed rulemaking (“ANPRM”). FinCEN received 241 comments, of which 215 were made public and are available for review at regulations. gov. Parties that commented included secretaries of state, legal associations, law enforcement officials, and business associations. This ANPRM was the first in a series of regulatory actions that FinCEN has undertaken to implement the CTA. There should be another comment period after FinCEN issues its proposed regulations. What is a reporting company? A “reporting company” is broadly defined by CTA as any corporation, limited liability company, or similar entity that is (1) created by filing a formation document with a secretary of state or similar office; or (2) formed under the law of a foreign country and registered to do business in the United States. There are 24 exemptions to what entities qualify as reporting companies. A reporting company does not include, among other types of companies: 1. An issuer of securities registered under Section 12 of the Securities Exchange Act of 1934 (“Exchange Act”) or that is required to file supplementary and periodic information under Section 15(d) of the Exchange Act 2. An entity established under the laws of the United States, a state, or a political subdivision of a state, or under an interstate compact By Matthew Kingery, Lewis Glasser, LLC