The Corporate Transparency Act and Requirements

The Corporate Transparency Act (CTA) may change the way mergers and acquisitions are done. The CTA is part of the Anti-Money Laundering Act which falls under the National Defense Authorization Act (NDAA), enacted in 2021 by requiring reporting companies, also known as business entities, to file with the Financial Crimes Enforcement Network (FinCEN) in order for law enforcement to monitor for any misconduct.

The CTA says that companies need to file beneficial ownership information whereas in the past, the burden of finding and keeping a record of beneficial ownership had fallen to financial institutions, as discussed in this article from the American Bar Association.  Additionally, a lack of disclosure and due diligence by companies will result in large fines.

The goal of increasing self-reporting is to have more companies and their processes known as unknown companies are more likely to be targeted by criminals and money laundering. Before it was a law, the CTA was an act passed in 2019 called the 2019 Transparency Proposal which is where the federal database for storing beneficial ownership information was introduced.

Read this Today’s General Counsel article for more information on the detailed wording of the CTA.