CTA Exemptions - Banks

The CTA (Corporate Transparency Act) contains 23 exemptions that relieve some companies from the duty to file a beneficial ownership report. Last week, I wrote about the public company exemption. This week, I am going to outline the exemptions that exist for banks.

CTA Filing Obligations

The Corporate Transparency Act (CTA) obligates most companies in the U.S. to file a beneficial ownership report with FinCEN. FinCEN is the Financial Crimes Enforcement Network of the U.S. Treasury Department.

Each beneficial ownership report must identify the company applicant who formed the company and each beneficial owner. For each individual, the report must provide the person's full legal name, data of birth, and home address. In addition, the report must provide a unique identifying number and a corresponding image of the document that provides that number. Acceptable documents and numbers include an unexpired passport or drivers license.

Because this personally-identifiable information is sensitive, many companies find it difficult to collect, and store this data.

Once filed, the company must amend its report within 30 days after any change in any item of previously-reported information. For example, a change in home address, or a passport or drivers license renewal, could trigger the need for an amendment.

Because the focus of the CTA, however, is to build a database of beneficial ownership to empower law enforcement to fight money laundering, FinCEN's proposed regulations exempt many types of companies whose beneficial ownership is already part of a government regulatory system.

Exemptions for Banks

Subsection 1010.380(c)(2)(iii) of the proposed regulation exempts any "Bank." The proposed regulation defines "bank" as it is used in any of:

(A) Section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);

(B) Section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)); or

(C) Section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)).

Subsection (A) includes state and federal banks, and their branches, that accept deposits insured by the FDIC. The FDIC regulates each such entity so that it knows their beneficial ownership.

Subsection (B) covers several other entities that are treated like banks for purposes of the Investment Company Act. This includes any member bank of the Federal Reserve System, and any other banking institution that is subject to examination by any federal or state bank regulatory authority.

Subsection (C) is nearly identical to Subsection (B).

Because banks are accustomed to maintaining controls and reporting on their compliance to a regulator, each bank should know its regulatory status for CTA exemption purposes.

Banks that undergo changes in regulatory authority, however, should remain alert for ways that such a change might impact their CTA exemption.

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