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Understanding The Corporate Transparency Act: Updates & Changes


The Corporate Transparency Act (CTA) was signed into law in January 2021 as part of the National Defense Authorization Act for Fiscal Year 2021. The CTA is intended to improve transparency in the ownership of US corporations and limited liability companies (LLCs) and prevent the use of these entities for illegal activities such as money laundering and terrorist financing. In this article, we will examine the updates and changes to the 2022 Corporate Transparency Act, how they further enhance the 2018 Treasury CDD Rules, and what they mean for compliance and risk management.

What is the 2022 Corporate Transparency Act?

The 2022 Corporate Transparency Act is an amendment to the Bank Secrecy Act that requires certain US corporations and LLCs to report information about their beneficial ownership to the Financial Crimes Enforcement Network (FinCEN). By understanding who is benefiting from the business profits, it brings a level of legitimacy to the business thereby helping to eliminate the setup of “shell companies,” ones with no business plan or economic purpose. Prior to these changes, there was a loophole in the corporation and business entities setup process that did not require the purpose of the business and who is running it. By requiring the beneficial owners of the business entity be identified it unmasks the individuals who are exploiting the loophole. The CTA aims to improve transparency in the ownership of US corporations and LLCs and prevent their use for illicit activities.

Updates and Changes to the 2022 Corporate Transparency Act

The 2022 Corporate Transparency Act includes several updates and changes that affect corporations and LLCs and their anti-money laundering and counter-terrorism financing programs. Some of these updates and changes include:

Reporting Requirements

Under the CTA, corporations and LLCs must report certain information to FinCEN about their beneficial owners. This includes the name, date of birth, address, and unique identification number of each beneficial owner with at least a 25% ownership interest in the company. For regulated Financial Institutions and BSA/AML Regulated businesses it also means identifying, verifying and record keeping of this information, for use if/when a transaction or suspicious activity happens that requires its reporting.

Exemptions Certain corporations and LLCs are exempt from the reporting requirements of the CTA, such as those already subject to reporting under similar US laws or those with a certain number of employees and gross receipts.

Penalties and Enforcement The CTA includes penalties for violations of the reporting requirements, including civil and criminal penalties. It also provides for increased enforcement efforts by law enforcement agencies responsible for combating money laundering and terrorist financing.

Compliance and Risk Management Implications The updates and changes to the 2022 Corporate Transparency Act have meaningful implications for compliance and risk management for corporations and LLCs. Affected entities must comply with the new reporting requirements, starting in January 2024 which may involve significant adjustments to their current AML/CTF programs, including the policies and procedures for identifying and verifying the identity of beneficial owners. In addition, affected entities must ensure they are aware of the reporting exemptions under the CTA, so that unnecessary reporting is avoided. Failure to comply with the CTA's reporting requirements can result in significant penalties, and it is essential that corporations and LLCs adapt their AML/CTF programs and procedures to comply with the new law.

Bad News and Good News First the Bad News, your BSA/AML Teams are already running at full capacity. However, the 2022 CTA is not something you can put off developing and implementing effective processes and procedures to comply with the rules.

Good News - IntegrAssure is available to partner with you to establish risk-based processes and procedures with tech enabled solutions tailored to your institution's customer base and risk tolerances. IntegrAssure has experienced staff that have been in your seat and can help with updating policies, procedures with process flows, and identify staffing requirements to help you be fully compliant. IntegrAssure has trained and certified staff (on standby) for rapid deployment to augment your team. By letting us help with daily alert dispositioning, you stay in compliance, allowing your team to focus on the updates or changes required for 2022 CTA.

Contact us and let us know how we can best assist you!!!

The 2022 Corporate Transparency Act represents a significant effort to improve transparency in the ownership of US corporations and LLCs and prevent their use for illicit activities such as money laundering and terrorist financing. Corporations and LLCs must comply with the new reporting requirements, including exemptions, to avoid penalties and enhance their risk management and compliance programs. By investing in technology and personnel and updating policies and procedures, corporations and LLCs can ensure that they are well-positioned to comply with the CTA and prevent their use for illegal activities.

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