Implications of the Corporate Transparency Act

Many companies, including investment advisers, may not be aware that they will soon be required to report detailed information relating to their owners to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) pursuant to the Corporate Transparency Act beginning in January 2024, and failure to report in a timely fashion can lead to potentially significant hefty fines and, for willful violations, imprisonment.   The Corporate Transparency Act (CTA) aims to combat financial crimes, such as money laundering, terrorist financing, and other illicit activities, by increasing transparency in the ownership of entities such as corporations and limited liability companies. It does this by requiring these entities to disclose information about their beneficial owners to FinCEN. This initiative is intended to prevent the misuse of anonymous shell companies for illegal purposes and enhance the ability of law enforcement and regulatory agencies to investigate and deter financial crimes.   So how does this impact investment advisory firms?   Like other entities, investment advisers organized as corporations, limited liability companies, etc. will need to report information about their owners to FinCEN beginning January 1, 2024 unless there is an available exemption. While SEC-registered investment advisers and advisers that avail themselves of the venture capital adviser exemption found in Section 203(l) of the Investment Advisers Act of 1940 are themselves exempt from the reporting requirements, that does not mean that their affiliated entities, or other investment advisers, such as those advisers relying on the private fund adviser exemption found in Section 203(m) of the Advisers Act or state-registered investment advisers are exempt from such reporting requirements.   As such, it’s vital that advisers conduct a thorough analysis as to whether their entities are subject to the reporting requirements under the CTA and, if not, to ensure they are prepared to file beneficial ownership reports when the time comes.   If you require assistance in analyzing whether your firm is subject to the CTA and its reporting requirements, please feel free to schedule an appointment with us by using the Calendly link in the comments below.   #wealthmanagement #financialservices #privatefunds #RIAs #investmentadvisers #compliance  

The U.S. Department of the Treasury has released its semi-annual regulatory agenda and there are some interesting updates on AML Act and Corporate Transparency Act timing… ➡️ The final beneficial ownership use and access rule is scheduled to be published in September. The proposed rule said financial institutions would only be allowed to use the beneficial ownership registry for due diligence collection. It did not permit FIs to use the information for broader anti-financial crime requirements such as customer risk assessment, identification of suspicious activity, and sanctions screening. Feedback from the industry was that these restrictions would make the registry useless for FIs. Will be very interesting to see if FinCEN makes changes in the final rule in response to the feedback. ➡️ FinCEN plans to issue a Notice of Proposed Rulemaking that would reconcile current beneficial ownership requirements with those in the Corporate Transparency Act in November. That will be followed by a 60 day comment period ending in January and a final rule at a yet to be determined point after that. That means the requirement for businesses to submit their information to FinCEN (effective January 1, 2024) will go into effect before all of the rulemaking related to the Corporate Transparency Act is complete. This is important because a key question is how many control people FIs will be required to collect. Right now it’s one. Under the CTA it could be a lot. If businesses are already submitting these control people on January 1, it would seem more likely that FinCEN will proceed with requiring multiple control people. This will be challenging and require significant resources for FIs to implement. ➡️ FinCEN plans to issue a Notice of Proposed Rulemaking under that AML Act for how FIs should incorporate national priorities into their AML program in December. That will be followed by a 60 day comment period and a final rule at a yet to be determined point in the future. Definitely a busy end of 2024 for FinCEN. Let me know your thoughts on these latest developments! I’ll link to the full document in the comments. Thanks to Jim Richards for pointing out that this had been released. #aml #beneficialownership #corporatetransparencyact #amlact #fincen

On January 1, 2024, a landmark legislative initiative, the Corporate Transparency Act (CTA), becomes effective. The CTA has been applauded by lawmakers, law enforcement, financial regulators and civil society campaigners at the forefront of the global effort against transnational kleptocracy and corruption. The CTA and the rules promulgated by the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) mandate the submission of beneficial ownership information for US companies and non-US companies authorized to do business in the United States (so-called reporting companies), unless such companies fall within one of 23 categories of exemptions. The objective of the CTA, in short, is to provide to domestic and non-US law enforcement, regulators and other bodies authorized to receive it information on beneficial owners of shell companies, and going forward those who set up such companies. FinCEN estimates that 32.6 million reporting companies will be subject to FinCEN filing obligations under the beneficial ownership reporting rules in the first year. There are tiered filing deadlines (beginning after January 1, 2024) as well as requirements to update and correct filings. Information submitted to FinCEN will not be publicly available.    My briefing note summarizing the CTA and the related beneficial ownership reporting rules is available here: https://bit.ly/3RTWKYj

The U.S. Department of the Treasury has announced a suspension of enforcement for certain provisions of the Corporate Transparency Act (CTA), affecting U.S. citizens and domestic reporting companies. This shift, stemming from the announcement on March 2, 2025, impacts the beneficial ownership reporting requirements that were originally designed to enhance transparency and combat money laundering, terrorist financing, and other illicit financial activities. The suspension raises concerns about non-compliance with global standards, particularly the Financial Action Task Force (FATF), which requires countries to enforce stringent measures against money laundering and terrorist financing. This could potentially impact the U.S.’s standing on the international stage, affecting its credibility and cooperation with other jurisdictions in financial crime prevention. While the suspension may ease immediate compliance burdens for businesses, it could also create avenues for exploitation, allowing bad actors to hide illicit financial activities, including money laundering. This decision might lead to a ripple effect in how foreign entities view U.S. companies, potentially influencing investment decisions, corporate partnerships, and international regulations. Despite this pause, global scrutiny remains high, and adhering to best practices in transparency and accountability is essential for long-term growth and maintaining trust with international partners. https://lnkd.in/ed7fUB2u #FATF #CorporateTransparencyAct #Compliance #FinancialRegulations #TreasuryDepartment #AML #MoneyLaundering #Transparency