U.S. Corporate Transparency Act Targets Financial Crime

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The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) is set to gain more information to combat financial crimes with the implementation of the Corporate Transparency Act. The act, passed as part of the National Defence Authorisation Act for the 2021 fiscal year, officially went into effect this month.

Attorney Ryan McCall from Tully Rinckey highlights the significance of the act in addressing issues related to companies owned and operated by individuals in the shadows. The Beneficial Ownership Information report, required from limited liability companies (LLCs), corporations, and affiliated entities, aims to unveil information about entities that have been previously unknown.

The report mandates the disclosure of simple information, such as taxpayer ID or social security number, name, address, and other relevant details. The law primarily targets money laundering, financial support for terrorist activities, and non-payment of taxes.

The Treasury compiles the disclosed information into a database accessible to law enforcement, courts, and financial institutions. McCall emphasises that businesses formed in 2024 have 30 days to file a report, while those formed earlier have one year to comply.

Non-compliance with the Corporate Transparency Act can lead to serious consequences. Civil penalties of up to $500 per day of violation and criminal penalties of up to two years in prison with $10,000 fines can be imposed. McCall emphasises the simplicity of the report but encourages businesses to seek assistance to ensure compliance.

A beneficial owner, as defined by the act, is an individual who directly or indirectly exercises substantial control over the reporting company or owns or controls at least 25% of its interests. The implementation of this act reflects the U.S. government’s commitment to enhancing transparency and combating financial crimes within the corporate sector.