The US Corporate Transparency Act (CTA) was enacted in January 2024. It is designed to combat illicit financial activities by mandating that companies with US ties disclose details of beneficial ownership to the Financial Crimes Enforcement Network (FinCEN).

While primarily targeting US-based businesses, the CTA carries significant ramifications for foreign entities, including UK and European companies operating in US jurisdictions. Ciela McDevitt, Business Development Director at Centralis Group, provides a detailed overview of the CTA’s requirements and compliance priorities for companies with international footprints.

Overview of the Corporate Transparency Act

Introduced as part of the Anti-Money Laundering Act of 2020, the CTA aims to enhance corporate ownership transparency. The act requires ‘reporting companies’ – comprising both US-based entities and specific foreign entities registered in the US – to disclose beneficial ownership information. Beneficial owners are individuals with significant control over the company or those holding at least a 25% ownership interest.

Key details to be disclosed include each beneficial owner’s full name, date of birth, current address and identification information. These details are confidentially submitted to FinCEN and aren’t made publicly available, unlike information submitted to the Secretary of State corporate records.

Categories of reporting companies

The CTA identifies two primary categories of reporting companies:

• Domestic reporting companies: These include US corporations, limited liability companies (LLCs) and other formal entities registered with state authorities.
• Foreign reporting companies: Non-US entities, such as European corporations, registered to operate in US states or territories fall under this category.

Exemptions exist for 23 categories of entities, including publicly traded companies and certain large operating entities that are already subject to stringent regulatory oversight.

Implications for non-US companies with US operations

Non-US entities registered to operate within the US – covering territories such as Puerto Rico and Guam – are treated similarly to domestic firms under the CTA. This means such entities must regularly disclose beneficial ownership information. Non-compliance can lead to severe penalties, including hefty fines of $591 per day for the individual who wilfully violates the BOI reporting requirements and even potential imprisonment.

Key exemptions for non-US entities include:

• Large operating companies: Those meeting specific thresholds for US employment, physical presence and revenue.
• Investment vehicles: Already adhering to existing regulatory transparency requirements.

Compliance priorities for UK and European companies

Adhering to the CTA’s stringent requirements demands a structured approach. Compliance may involve a more robust framework than typically required in European jurisdictions for UK and European businesses. Key actions include:

• Identify beneficial owners: Pinpoint individuals with substantial control or at least 25% ownership. Firms must reassess ownership structures to align with CTA standards.
• Collect and maintain accurate data: Compile detailed information on beneficial owners, including legal names, birth dates, addresses and identification numbers. Accurate data is critical to avoiding compliance challenges.
• Meet reporting deadlines: Companies existing before 01 January 2024 must submit their first Beneficial Ownership Information (BOI) report by 01 January 2025. Newly registered entities must file reports within 30 days of their registration. Timely updates following changes in ownership are also required.
• Establish a compliance framework: Regularly review and update ownership details. Assign internal compliance responsibilities or engage external advisors to ensure ongoing adherence to the CTA.
• Account for compliance costs: Cross-border ownership structures can complicate compliance and increase associated costs. Seeking guidance from legal and compliance experts can help streamline the process and address multi-jurisdictional obligations effectively.

Deadlines and compliance challenges

The CTA imposes clear deadlines: companies established before 2024 must file their initial reports by January 2025. Corporate entities formed in 2024 have 90 days to comply, and starting in 2025, newly registered businesses have just 30 days. These tight timelines necessitate proactive measures to establish and implement compliance systems.

For businesses with complex ownership structures, correctly identifying and reporting beneficial owners may require expert assistance. Engaging legal and compliance professionals can ensure alignment with US regulatory standards and reduce non-compliance risk.

Navigating the complexities of the CTA

The CTA marks a significant shift in corporate transparency, with extensive implications for UK and European firms operating in the US. Businesses must prioritise compliance to minimise legal and financial risks while aligning with evolving global transparency standards. This includes implementing robust reporting systems, maintaining up-to-date ownership records and seeking professional advice to navigate the complexities of the CTA effectively.

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