FinCEN Releases Final CTA Regulations
SEPT 29 | This morning, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) released the final rule regarding required reporting under the Corporate Transparency Act (CTA) or “Beneficial Ownership” law passed by Congress as part of the National Defense Authorization Act in Dec. 2020.
The law requires certain LLCs and small companies to continually report to FinCEN all beneficial owners’ personally identifiable information, which is then posted on a public database.
The rule goes into effect on Jan. 1, 2024, making no changes significant to make it palatable to small business. This portion of the regulations governing the CTA embody the intent of the law—something NSBA ardently opposed every step of the way.
According to NSBA President and CEO Todd McCracken, “There simply is no way even significant changes in the regulations for the Corporate Transparency Act could remedy what was and will be bad policy. The regulations still target only small businesses, still require burdensome, duplicative paperwork, and still fail to require federal agencies to share information they’re already collecting.”
Affected companies created prior to enactment of the regulations’ effective date will have one year to report, while companies formed after Jan. 1, 2024, will have just 30 days to file their reports. Subsequently, companies will have 30 days to file updated reports upon any changes in their beneficial ownership.
This first rule from FinCEN is just one of three to implement the CTA. Up next: a rule governing who may access this information and how to safeguard it, as well as updates to FinCEN’s customer due diligence rules.
While the regulations do not cover penalties given the law’s specificity, it is important to note that failure to comply would be a federal crime with civil penalties of $500 per day up to $10,000 and criminal penalties of up to two years in prison.
NSBA supports common-sense efforts to stem money laundering, these changes to the CTA requiring duplicative disclosures are the wrong way to do it, especially since the information is already being collected. The goal of lawmakers could easily be achieved through a simple mandate requiring federal agencies to share information.
Instead, small businesses have been targeted and will bear significant burdens once again due to a lapse in effective governing.