In January of 2021, Congress adopted substantial changes to the nation’s anti-money-laundering laws, including enacting a new federal statute, the Corporate Transparency Act (CTA or Act), that will establish a centralized database of corporate beneficial ownership. The CTA mandates that by 2025 (or, in some cases, by 2024) all domestic and foreign companies doing business in the U.S. must provide information about the true beneficiaries of their operations by complying with new reporting requirements. The legislation is designed to capture information on an estimated 32 million companies that operate in unregulated areas or are too small to trigger disclosure obligations under other federal laws yet can be used by criminals, terrorists, and other bad actors to hide money laundering and other illicit financial activities. The Treasury Department’s Financial Crimes Enforcement Network bureau (FinCEN) explained the need for a beneficial ownership database, stating, “Illicit actors frequently use corporate structures such as shell and front companies to obfuscate their identities and launder their ill-gotten gains through the U.S. financial system. Not only do such acts undermine U.S. national security, but they also threaten U.S. economic prosperity: shell and front companies can shield beneficial owners’ identities and allow criminals to illegally access and transact in the U.S. economy, while creating an uneven playing field for small U.S. businesses engaged in legitimate activity.” FinCEN issued its final rule on the CTA’s reporting requirements on September 29, 2022. Although the regulations resolve many of the issues that arose after the Act’s passage, a number of compliance challenges and questions still remain.
