FinCEN has only announced a proposed rule. FinCEN is also soliciting comments on the proposed rule and changes can still be made. There is no reporting requirement yet. However, companies should see whether they are a “reporting company” or exempt as defined by the Corporate Transparency Act. Based on the proposed rule announced on December 7, the following actions should be taken.
New entities and foreign (non-US) companies
Business owners planning on a new entity formation on or after the effective date of the regulations (still to be determined by FinCEN), domestic companies that have been formed before the effective date, foreign (non-US companies) that will register to do business in a U.S. state on or after the effective date, and foreign (non-US) companies that were registered to do business before the effective date will need to do the following:
- determine if the entity meets the definition of “domestic reporting company” or “foreign reporting company”
- if so, determine if the entity qualifies for one of the 23 exemptions
Non-exempt reporting companies
Reporting companies that are not exempt should do the following:
- determine the identity of every individual who meets the definition of “beneficial owner”
- determine the identity of every individual who meets the definition of “company applicant”
- obtain the required identifying information from each individual who meets the definition of beneficial owner and company applicant or, if the individual has obtained a FinCEN identifier, obtain that individual’s FinCEN identifier
- obtain the required information for the reporting entity or file an application for a FinCEN identifier
- complete the report (in a format to be determined by FinCEN at a later date)
- file the report (in the manner to be provided by FinCEN at a later date) within 14 days of formation or registration for companies formed or registered after the effective date and within one year for existing companies
After filing the initial report reporting companies must do the following:
- file an updated report within 30 days of a change in any of the information previously reported
- file a corrected report within 14 days of learning that information previously reported was incorrect
Exempt companies
Companies that were exempt from filing an initial report must do the following:
- file an initial report within 30 days of a change that results in the company no longer being exempt from reporting
Company applicant or beneficial owner
Individuals who meet the definition of “company applicant” and “beneficial owner” should do the following:
- provide their identifying information to the reporting company or
- apply to FinCEN for a FinCEN identifier and provide the FinCEN identifier to the reporting company
- if a FinCEN identifier is obtained, file an updated or corrected application if the information changes or was inaccurate when filed
The Why
The Corporate Transparency Act is an important step for the United States to prevent money laundering and terrorist financing. This helps to bring the United States into compliance with international anti-money laundering standards.
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