The Corporate Transparency Act (CTA) was passed in January 2020, but its requirements have not yet been entirely finalized. FinCEN is expected to publish the Act’s final regulations and put them into effect no later than Jan 1, 2023 (FRGA Law), which is starting to feel like it’s right around the corner. After the final rules come into effect, companies already in existence will have one year to report beneficial ownership to FinCEN, while entities formed after the effective date will have only 14 days to comply. FinCEN also requires companies to file updated reports if any of their reported information changes.
Why You Must Comply
Organizations that don’t comply with the requirements could face stiff penalties, including fines up to $10,000 and imprisonment for up to two years. These penalties apply to persons who willfully provide false or fraudulent information or who purposely fail to report as required, despite knowing the law. Innocent mistakes, or negligent violations, will not be penalized, as long as they are corrected within 14 days of the entity becoming aware of the mistakes and within 90 days of filing the inaccurate report.
What You Must Report
Reporting companies must file beneficial ownership information reports, which should have the following information:
- The Company: Name, trade or DBA name (if applicable), address, formation jurisdiction, and tax identification number
- Beneficial Owners: Name, birth date, residential address, ID number from an acceptable official document, and a scanned photo of that ID
- Company Applicants: Name, birth date, residential or business address, ID number from an acceptable official document, and a scanned photo of that ID
How to Report
FinCEN will more than likely release an online system and/or PDF method for submitting these requirements. How do we know this? Well, we don’t know it, but common sense dictates that this will be the case. We live in a world where you digitally submit everything from job and college application forms to official tax documents. The IRS alone allows you to submit 16 of its official tax forms digitally. That’s simply the way the world we now live in operates.
Additionally, FinCEN themselves has an e-filing system for their Bank Secrecy Act (BSA) forms. The BSA’s goals are very similar to the CTA’s goals (to prevent criminals from hiding or laundering money through banks or other financial institutions), and as of April 1, 2013, financial institutions have had to use new FinCEN reports that are available only electronically through the BSA e-filing system.
The final indication that you will be able to file your beneficial ownership FinCEN report electronically is the notice the Department of Treasury, Bureau of the Fiscal Service put out on behalf of FinCEN on March 17, 2020. In this notice, they stated that “subject to final approval,” they intended to “negotiate a sole source procurement […] to Northrop Grumman Systems Corporation for the Bank Secrecy Act (BSA) Electronic Filing (E-Filing) System Development Services and Operational Support.” The Northrop Grumman notice indicated an e-filing system will likely be in place late in 2022 or 2023.