As part of the National Defense Authorization Act of 2021 Congress adopted the Corporate Transparency Act (or “CTA”). The CTA includes some of the most significant changes to US anti-money laundering (“AML”) laws in recent years.
Beneficial Ownership Reports and FinCEN
- Exercises substantial control over the covered entity, or
- Holds at least 25 percent of the ownership interests of the covered entity.
Importantly, the CTA does not define "substantial control" and does not describe how ownership interests are to be measured. We expect that the upcoming FinCEN regulations will define these terms.
Exempt Types of Beneficial Owner
- Custodians/agents for an individual, or those acting solely as an employee of an entity.
- An entity's creditors, unless the creditor holds at least 25 percent of the ownership interests of the covered entity or substantial control.
- An individual whose only interest in a covered entity is through a "right of inheritance."
- A minor child if the information of the parent (or guardian) is reported.
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Information Required in a Beneficial Ownership Report
- Full legal name,
- Date of birth,
- Current residential or business street address, and
- A unique identifying number from an acceptable identity document or a unique identity number generated by FinCEN.
Importantly, if an exempt entity has a direct or indirect ownership in a covered entity, the covered entity must report the legal name of the exempt entity, but not the other information generally required.