Countdown to CTA Compliance: Crucial Steps to Take Now

On January 1, 2024, the U.S. Corporate Transparency Act (CTA) goes into effect. All qualifying businesses must report personal information on their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This is an effort by the U.S. Treasury Department to combat financial fraud, money laundering, and other financial crimes.

Although the CTA was enacted in 2020, full guidance and reporting regulations were not available until this year. As a result, FinCEN has not required compliance and reporting until January. However, that deadline is rapidly approaching. Businesses that have not begun gathering their information need to take steps to assemble their documents now.

The Second Final Rule was to have been released in September of this year, but as of this date (September 11, 2023) it has not been issued. Delays in the rollout of the online reporting system (see below) are being addressed, but at this time no further changes to the deadline are expected.

Companies established or registered before January 1, 2024, have one year to submit initial reports. Companies created or registered after January 1, 2024, have 30 days from that date to file their initial reports. This discrepancy makes developing an in-house reporting system abundantly clear for any business planning on opening or expanding in the next year.

What Companies Will Need to Report

FinCEN is expecting a full roster of beneficial owner information (BOI) on all “beneficial owners.” A beneficial owner is any individual exercising “substantial control” over the company or who has 25% of the ownership interest. Officers, board members, stakeholders and key investors can all be considered beneficial owners.

Creditors, minor children with controlling interests held in trust, or individuals with controlling interests through right of inheritance are not beneficial owners. Employees of the reporting company are not beneficial owners unless they are also board members or similar officers.

The BOI is extensive and must include the company’s information, all information about each beneficial owner, and an image of an identifying document, such as a state driver’s license, passport, or other document.

Preparing for Updates

Once a company has filed its first BOI, it must file an updated report whenever any information changes. Changes could include:

  • New beneficial owner, or departure of an existing owner
  • Changes in company information
  • Transfer of ownership
  • Errors in any previously submitted documents

If a company knows it will be making multiple filings, it can apply for a FinCEN identification number that can be used on subsequent filings. This helps streamline the filing process.

Companies should have assembled a file of their BOI data and documents by this point. It is not too late to start, but if your business has multiple individuals who fall under the “beneficial owner” definition, you should have one person tasked with gathering this information immediately.

The Beneficial Ownership Secure System

FinCEN has promised an encrypted online reporting system called BOSS—Beneficial Ownership Secure System. This system should be online by January 1, 2024. As of this date (September 10, 2023) it is not active, and there is no further information about when and how it will be accessed.

Businesses should identify one individual within the company to periodically check the FinCEN website (FinCEN/boi) for information on reporting and downloading information. There are no updates more recent than March 24, 2023.

Update Corporate Transparency Software

If you have not already done so, your company should upgrade its corporate transparency software platform. Entity management software centralizes your information and maintains data compliance for a range of regulations. Since the CTA is presently in flux, having a software platform which updates as new regulations are released ensures your company remains compliant.

Having this software in place when the CTA deadline arrives means that your IT staff will be trained in its use and can gather and update information as needed. FinCEN requires updates be filed within 30 days of any change or error. You’ll want your employees well-versed on both CTA requirements and any new software before the deadline arrives. 

Athennian is one of the leading entity management software providers and is prepared to assist large and small corporations in readying for the arrival of CTA’s rollout. When it is time for all BOIs to have their unique identifiers and information to be reported to FinCEN, the Athennian system will be integrated with your existing databases and ready to begin reporting.  Contact us today to schedule a custom demo and learn more about what Athennian can do for your business.


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