Beginning on Jan. 1, 2024, most newly formed businesses and many existing businesses will be required to file reports with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury under the Corporate Transparency Act (CTA) and implement regulations adopted on Sept. 30, 2022 (the Beneficial Ownership Rule or the Rule). 87 Fed. Reg. 59,498 (Sept. 30, 2022). FinCEN has indicated that filings will be required to be made electronically once the required registry and additional new regulations concerning the registry are in place. The CTA is part of the Anti-Money Laundering Act of 2020, which itself is part of the 2021 National Defense Authorization Act (NDAA).

The CTA represents the culmination of Congressional efforts to crack down on bad actors who seek to conceal their ownership of business entities through the use of shell companies in order to facilitate illicit activities, such as money laundering, financing of terrorism, human and drug trafficking, and securities fraud. It does this by strengthening the United States financial crimes monitoring systems, filling some of the gaps left by state laws, which generally do not require companies to disclose their owners or those in control. Among the significant provisions in the CTA is the creation of a non-public, secure central registry, the Beneficial Ownership Secure System (BOSS), to be maintained by the Secretary of the Treasury to track the beneficial ownership of entities formed in or registered in the United States. The beneficial ownership information stored in BOSS is confidential and will be disclosed only in limited circumstances. Accordingly, FinCEN will be engaging in additional rulemakings to establish rules for, among other things, who may access beneficial ownership information, for what purposes, and what safeguards will be required to ensure that the information is secured and protected.

The CTA and the Beneficial Ownership Rule create new reporting obligations to FinCEN for certain entities (defined as "reporting companies") relating to their company applicants, beneficial owners, control persons, and entity structures (each as defined in the CTA and related regulations) and for certain associated individuals. Civil and criminal fines and penalties will be prescribed for failure to comply or for willfully providing false information to FinCEN. Lawyers representing reporting entities will need to be mindful of the requirements of the CTA and related regulations and may face penalties for failure to comply with the reporting requirements.