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The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020 within the National Defense Authorization Act for FY2021, granted FinCEN authority to require entities to disclose their beneficial owners in order to combat money laundering, terrorism financing, tax evasion, and other illicit finance schemes. Shell companies and nominee structures had long been exploited to obscure ultimate ownership from law enforcement and regulators.
The final rule creates a centralised beneficial ownership database at FinCEN. Reporting companies must provide: full legal name, date of birth, current address, and a unique identifying number (e.g., driver's license or passport number) for each beneficial owner and company applicant. The data is held in a non-public database accessible to law enforcement, certain financial institutions (for customer due diligence), and US federal and state agencies with national security or law enforcement needs.
Scope: The rule initially covered approximately 32 million existing businesses in the US, with roughly 5 million new entities created annually thereafter. Broad exemptions were included for 23 categories of entities already subject to existing regulatory oversight (banks, broker-dealers, insurance companies, public companies registered with the SEC, large operating companies with >20 employees and >$5m annual revenue, etc.).
Reporting thresholds: A "beneficial owner" is any individual who (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the ownership interests of the entity.