Title LXIV of the Anti-Money Laundering Act, better known as the Corporate Transparency Act, was passed by Congress in 2021. Going into effect on January 1st, 2024 the act will require businesses to report their beneficial owners. This post will explore when a report is necessary, what to include and and who to report to.
The Corporate Transparency Act defines a beneficial owner as individuals who hold at least a 25% ownership interest in a company, or who otherwise exercise “substantial control” over a company. This means a report of beneficial ownership must include not only prominent shareholders, but also individuals who are high in the chain of command, such as CEOs, directors or chairmen. These requirements are and/or, meaning only one of the criteria has to be met in order for a report to be necessary. A CEO may not have any ownership of the company, but the CEO will still have to be reported as a beneficial owner due to the importance of that position.
These reports must include the following information about the beneficial owners:
- Full legal name
- Date of birth
- Current residential address
- A unique identifying number from an acceptable identification document (Passport, Driver’s License etc.)
- The jurisdiction that issued the acceptable identification document (What country, Indian tribe, state or other entity is the identification document from?)
This information must be reported to FinCEN in a timely manner. FinCEN requires initial reporting of a business’ ownership be done within a year of the legislation taking effect (by January 1st, 2025). Additionally, FinCEN requires any changes in beneficial ownership (addition/removal of beneficial owners, changes in beneficial information such as a change of residential address) to be reported within 30 calendar days of the change.
These new requirements are a crucial change to that status quo for businesses. Failure to properly report beneficial ownership information can result in fines or even jail time. Because of this, it is always wise to consult a legal opinion for matters such as this.