Article 02.12.24
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The Corporate Transparency Act (CTA), adopted in January 2021, is now in effect. Pillsbury has assembled a multi-disciplinary task force to assist clients in preparing for and responding to the new and evolving requirements that the CTA will impose.
The stated purpose of the CTA is to assist in identifying beneficial ownership and control of entities operating in the United States, in order to facilitate anti-terrorism, anti-money laundering and tax collection activities of federal, state and foreign governments. It imposes on entities formed or qualified to do business in the U.S. the obligation to report individuals who substantially own and control them, or who helped form them—except for entities that benefit from one of the numerous exemptions provided. This information will be collected by FinCEN, an arm of the U.S. Treasury Department, in a confidential database that will be accessible by governmental authorities and authorized lenders, but not to the general public.
Willful failure to comply with the CTA can result in material civil and criminal fines and penalties.
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FinCEN has announced that the CTA will take effect for new entities formed from and after, January 1, 2024, and on January 1, 2025, for previously formed entities. Every business entity doing business in the U.S. will have to determine whether it might benefit from an exemption and, if not, how to prepare itself to respond to the CTA’s disclosure requirements. This may involve, among other things, becoming familiar with new forms and new procedures, and changes in the documentation used by the business entities generally (for example, joint venture agreements and loan agreements). Individuals whose identity might be disclosed will also want guidance. Financial institutions will need to reconsider their Customer Due Diligence (CDD)/Know Your Customer (KYC) procedures when, as planned, the existing rules are modified to conform more closely with the CTA.
Members of the Pillsbury CTA task force have been tracking the CTA’s evolution since 2021, including the voluminous regulations it entails. The firm's lawyers are prepared to assist clients in dealing with the tricky and not always clear requirements of the CTA, and to support related legal needs.