US Corporate Transparency Act

The Financial Crimes Enforcement Network’s final rule implementing the Corporate Transparency Act’s beneficial ownership information reporting requirements will become effective on January 1, 2024. Small and medium businesses should prepare for compliance with the requirements.

With the effective date of the Corporate Transparency Act (CTA) approaching at the start of 2024, affected entities should be aware of and begin preparing for new requirements, including for beneficial ownership information (BOI) reporting. In this LawFlash, we give an overview of the CTA and its specific impact on family offices, as well as its impact on individuals with interests in LLCs and other unregulated entities.

The final rule of the Financial Crimes Enforcement Network (FinCEN) implementing the Corporate Transparency Act’s (CTA’s) beneficial ownership requirements will become effective on January 1, 2024. The final rule may apply to some of the entities within a private fund structure unless such entities are restricted to come within applicable exemptions before reporting dates become effective.

Several US regulatory agencies have proposed or enacted new rules in 2023 aimed at making the investment process more transparent. Many of those changes, including amendments to the Investment Advisers Act of 1940 by the US Securities and Exchange Commission (SEC), new beneficial owner requirements under the Financial Crimes Enforcement Network’s (FinCEN’s) Corporate Transparency Act, sweeping new Hart­Scott-Rodino Act (HSR) rules by the US Federal Trade Commission (FTC), and Internal Revenue Service (IRS) regulations regarding the exemption for “qualified foreign pension funds” from taxation under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), are directly affecting how sovereign wealth funds (SWFs) are structuring their investments.

The final rule of the Financial Crimes Enforcement Network implementing the Corporate Transparency Act’s beneficial ownership requirements will become effective on January 1, 2024. Absent further guidance, sovereign wealth funds and similar non-US governmental institutions need to evaluate whether and to what extent the rule will apply to them, whether any exemptions are available, and whether operations can be restructured in order to take advantage of an available exemption.

The New York State Assembly recently passed the LLC Transparency Act (the LLC Act). If signed into law by New York Governor Kathy Hochul, the LLC Act would require limited liability companies (LLCs) formed or registered to do business in New York to disclose their beneficial owners to the New York State government, which would make this information available in a public database and potentially fundamentally change how businesses are organized in New York.

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) published notices on January 17 seeking public comment on two proposals: (1) the application document that individuals would use to obtain a FinCEN identifier (FinCEN Identifier Notice) and (2) the mechanism that FinCEN would use to collect beneficial ownership information (BOI) from reporting companies (BOI Collection Notice) (collectively, the Notices). The Notices are part of FinCEN’s further implementation of BOI reporting requirements under the Corporate Transparency Act.

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) recently proposed a new rule (the Proposed Rule) regarding beneficial ownership information access and safeguards pursuant to the Corporate Transparency Act.

The Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury issued a final rule on September 29, 2022, implementing the bipartisan Corporate Transparency Act’s beneficial ownership information reporting provisions. What’s noteworthy is that FinCEN used this as an opportunity to expand the definition of beneficial ownership to include any individual who exercises substantial control over the reporting company.

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) published on September 30, in the Federal Register, a final rule establishing beneficial ownership information reporting requirements pursuant to the Corporate Transparency Act. The Final Rule requires most entities created or registered to do business in the United States to file beneficial ownership information reports with FinCEN that identify two categories of individuals: (1) the beneficial owners of the entity and (2) the company applicants of the entity.

The recent reform of the German transparency register affects almost all companies in Germany and greatly expands the reporting obligations for German entities.

The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) on April 1 took the first step towards implementing the Corporate Transparency Act’s (CTA’s) beneficial ownership reporting requirements, issuing an Advanced Notice of Proposed Rulemaking (ANPRM).

While the Corporate Transparency Act largely applies to foreign-owned shell companies, domestic companies should carefully read the definition of “reporting company” to ensure they fall within one of the exceptions to the definition. Reporting companies should be mindful of the various penalties associated with noncompliance or providing inaccurate or misleading information to FinCEN.

The Corporate Transparency Act, found within the National Defense Authorization Act, directs the Financial Crimes Enforcement Network to establish and maintain a national registry of beneficial ownership information.

Partners David Brenneman, Gregg Buksbaum, Ayman Khaleq, Courtney Nowell, Daniel Nelson, and Jonathan Rich wrote an article for Global Relay Intelligence & Practice on the impact of US regulatory changes on sovereign wealth funds’ investment strategies.

Partner Kenneth Nunnenkamp spoke with the Risk Watch podcast about the Corporate Transparency Act—designed to help the United States government combat the use of shell companies for money laundering by requiring certain entities to disclose their beneficial owners.

Morgan Lewis partners Daniel Tehrani and Robin Nunn and associate Bryan Woll authored a Law360 Expert Analysis about the potential implications of the Corporate Transparency Act (CTA), found within the National Defense Authorization Act for fiscal year 2021.