In 2020, the United States Congress passed the Corporate Transparency Act (CTA) to enhance transparency in corporate ownership and control. The law requires certain corporations to report their ultimate beneficial ownership (UBO) information to the Financial Crimes Enforcement Network (FinCEN). Compliance with the CTA and UBO regulations can be a complex and challenging process for companies.

However, risk management teams can play a vital role in helping their companies comply with these requirements.

Understanding the Corporate Transparency Act and UBO Regulations

The Corporate Transparency Act requires certain corporations to report their UBO information to FinCEN. The UBO is defined as an individual who directly or indirectly owns or controls 25% or more of the ownership interests of a corporation. The purpose of the law is to prevent the use of anonymous shell companies for money laundering, terrorist financing, and other illicit activities.

• Key provisions of the law and its impact on companies

The CTA requires covered corporations to file annual reports with FinCEN that contain specified information about their UBOs, including name, date of birth, address, and identification number. The law also imposes civil and criminal penalties for non-compliance. Failure to comply with the CTA can result in fines and even imprisonment.

Role of Risk Management Teams in CTA Compliance

Risk management teams play a crucial role in helping their companies comply with the CTA and UBO regulations. These teams can help identify and assess the risks associated with UBO reporting, develop and implement policies and procedures for compliance, and coordinate with other departments to ensure compliance with UBO regulations.

1. Identifying and assessing risks associated with UBO reporting

Risk management teams can help their companies identify and assess the risks associated with UBO reporting. These risks can include data privacy concerns, data security risks, and reputational risks. By understanding these risks, risk management teams can develop effective strategies for managing them.

2. Developing and implementing policies and procedures for compliance

Risk management teams can also help develop and implement policies and procedures for compliance with the CTA and UBO regulations. These policies and procedures can include processes for identifying and verifying UBOs, monitoring and reporting changes in UBO ownership or control, and maintaining accurate and up-to-date UBO information.

3. Coordinating with other departments to ensure compliance with UBO regulations

Risk management teams can also work closely with other departments within their companies to ensure compliance with UBO regulations. This can include coordinating with legal, finance, and compliance departments to ensure that all relevant stakeholders are aware of the requirements and are working together to achieve compliance.

Importance of Entity Management Software in CTA Compliance

Entity management software can play a critical role in helping companies comply with the CTA and UBO regulations. This software can automate compliance processes, reduce the risk of errors, and provide real-time updates on UBO regulations and other compliance requirements. Additionally, entity management software can help companies maintain accurate and up-to-date UBO information.

1. Identifying and Verifying UBOs

Identifying and verifying UBOs is a critical step in complying with the CTA and UBO regulations. Risk management teams can help their companies identify UBOs through data analysis and risk assessment. They can also help verify UBO information through due diligence and other methods.

2. Monitoring and Reporting UBO Changes

Monitoring and reporting changes in UBO ownership or control is another critical aspect of complying with the CTA and UBO regulations. Risk management teams can develop strategies for monitoring changes in UBO information, including ongoing due diligence and data analysis. They can also ensure that changes in UBO information are reported to the relevant authorities in a timely and accurate manner.

Empower Your Risk Management Team With Athennian

Risk management teams play a critical role in helping companies comply with the requirements of the U.S. Corporate Transparency Act. By understanding the key provisions of the law and developing and implementing policies and procedures for compliance, risk management teams can help their organizations avoid penalties and reputational damage. Entity management software can also be a valuable tool for automating compliance processes, reducing the risk of errors, and providing real-time updates on UBO regulations and other compliance requirements.

Athennian offers custom consultations to help you understand the best options for the needs of your team, contact us today to learn more.