|Posted on August 11, 2021 at 11:40 AM|
Introduction. On January 1, 2021, the Corporate Transparency Act of 2020 (“CTA”) was enacted into law as part of H.R. 6395, the National Defense Authorization Act, 2021 (“NDAA”). The CTA added Section 5336 to the Bank Secrecy Act, 31 U.S.C. sections 5311 et seq., originally enacted in 1970 (“BSA”). On April 5, 2021, the United States Department of Treasury (“Treasury”) and Financial Crimes Enforcement Network (“FinCEN”) published proposed regulations under the CTA. The notice of proposed rulemaking contains 48 questions to be addressed in forthcoming beneficial ownership information reporting requirements to be promulgated within a year of the enactment.
Proposed Regulations. Under the legislative history, the purpose of the CTA was “to establish an improved reporting system relating to beneficial ownership information, including building in further protections to ensure that sensitive information is properly used and protected” by the U.S. government. The disclosure was intended to target “bad actors who own or control businesses that act as ‘fronts’ or shell companies on behalf of those conducting illicit activities.” The questions for comment, divided in five sections discussed below, purport to weigh the costs and benefits to stakeholders of implementing solutions to these legislative concerns.
The definitions section contains questions regarding the scope of reporting companies that would be subject to CTA requirements. The definitions section also seeks to clarify the scope of corporate filings practices under state or other applicable law, which would result in an entity being deemed a reporting company under the CTA. Ultimate beneficial owners ("UBOs") of reporting companies should be aware that any final rule defining such terms will determine whether a corporate structure falls within the purview of the CTA reporting requirements.