The U.S. Corporate Transparency Act ("CTA") is the first comprehensive ultimate beneficial owner ("UBO") and controlling persons reporting regime in the United States and will have broad and cascading implications to financial institutions, service providers, fiduciaries, private clients and family offices, inbound investors, and state agencies alike. It imposes reporting requirements on many existing and newly formed U.S. companies and non-U.S. companies registered to do business in the United States ("Reporting Companies"). At the same time, the CTA imposes various requirements upon the Financial Crimes Enforcement Network ("FinCEN") and the U.S. Department of the Treasury, including by way of mandating meaningful revisions to the current federal regulatory regime applicable to financial institutions in their anti-money laundering ("AML") and know-your-customer ("KYC") customer due diligence efforts.
As the business community prepares for the CTA to take effect on January 1, 2024, FinCEN continues to issue additional guidance for Reporting Companies. On September 27, 2023, FinCEN proposed an amendment to the final rule that would extend the reporting deadline for Reporting Companies formed between January 1, 2024 and January 1, 2025. Initially, Reporting Companies formed during this window were required to file their initial UBO reports within 30 days of formation. Under the new proposed amendment, however, these Reporting Companies will have 90 days to file their initial UBO reports. It is anticipated that the public comment period for this proposed rule will close October 28, 2023, and that the amendment would become final sometime in November or December 2023 in advance of the January 1, 2024 effective date.
The proposed amendment does not alter any other reporting requirements under the CTA. Rather, Reporting Companies formed prior to January 1, 2024 will still have until January 1, 2025 to file their initial UBO reports, and Reporting Companies formed after January 1, 2025 will still have 30 days to file their initial UBO reports.
FinCEN's reasoning for proposing this extension is to allow Reporting Companies to better understand and comply with new regulatory obligations, give Reporting Companies more time to obtain necessary information, and provide more time to resolve questions that may arise in the process of completing initial reports. This should be a welcomed change for Reporting Companies, especially those with complex ownership structures. Still, private businesses, including family offices, should prepare for the CTA before year-end by reviewing structures to simplify and optimize their reporting posture; establishing internal policies, procedures, and databases; and consulting with counsel both to explore appropriate and acceptable reporting positions and to otherwise ensure timely compliance.
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