The Corporate Transparency Act (CTA) holds immense potential in promoting fairness and combating illicit activities within the business world. Enacted in 2020 as part of the National Defense Authorization Act for Fiscal Year 2021, this legislation sets a new course for corporate transparency. Although the CTA's effective date is set for January 1, 2024, the journey towards establishing the final rules necessary for full implementation has encountered its fair share of delays and challenges.
Overview of the CTA Rulings Timeline to Date:
January 2021: A significant milestone was reached as the CTA became part of the Anti-Money Laundering Act of 2020, contained within the National Defense Authorization Act for Fiscal Year 2021. This legislation mandates that companies disclose their beneficial ownership information (BOI) to a non-public government database maintained by the Financial Crimes Enforcement Network (FinCEN).
December 2021: FinCEN took a pivotal step forward by releasing the proposed Beneficial Ownership Information (BOI) reporting. This marked the first of three rulemakings planned for the implementation of the CTA. The subsequent rule will determine who may access BOI, for what purposes, and the safeguards necessary to protect this information. Lastly, the third rule will revise FinCEN's customer due diligence rule after the finalization of the BOI reporting rule.
September 2022: FinCEN published the Final Rule on Beneficial Ownership Reporting (BOI), providing initial guidance on compliance obligations by identifying who is required to report what and when.
December 2022: FinCEN released the second proposed rule, outlining the access protocols for authorized users of Beneficial Ownership Information (BOI). Stakeholders were given the opportunity to submit written comments on the proposed rule until February 14, 2023.To date, a final rule has not been published.
September 2023 (estimated): The release of the second Final Rule, governing access protocols for authorized users, is anticipated to occur in September 2023, just a few months before reporting is scheduled to commence on January 1, 2024.
By January 1, 2025: The third and final rulemaking will revise FinCEN's existing Customer Due Diligence rule (2018), to be implemented no later than one year after the effective date of the Final BOI Reporting Rule (January 1, 2024).
Causes of Current Delays:
Several factors have contributed to the delays in finalizing the second ruling required for CTA implementation. The extended comment submission period for the proposed rule on BOI access and database highlights the careful consideration of concerns raised by various stakeholders. Members of the Congress' Financial Services Committee have sought clarification from FinCEN regarding educating entities about their reporting obligations, expressing concerns about potential burdens on small businesses. These inquiries and expectations for a satisfactory response have inevitably played a part in the delay of the implementation timeline.
Additionally, several sectors have identified significant deficiencies in FinCEN's initial draft of the rule, particularly regarding simplified and secure access to the beneficial ownership database that will be known as BOSS: Beneficial Ownership Secure System. Seamless access is pivotal for the efficacy of the law as a whole. FinCEN is actively working on reissuing a beneficial ownership information collection form to address statutory reporting requirements that were initially rendered optional in the draft.
How Athennian Can Help Companies Prepare for Compliance:
As the deadline for CTA compliance rapidly approaches, companies must proactively take steps to ensure their readiness to avoid civil and criminal penalties. As per the final rules issued thus far, reporting companies established or registered before January 1, 2024, will have a one-year window (until January 1, 2025) to submit their initial reports. Alternatively, reporting companies created or registered after January 1, 2024, will have 30 days from the receipt of their creation or registration notice to file their initial reports. This highlights the importance of implementing a modern entity management system capable of facilitating seamless compliance, particularly for companies with complex corporate structures or those embarking on market expansion projects in the coming year. Such companies will face concurrent reporting deadlines, further emphasizing the need for an efficient and effective system in place.
While the implementation of the Corporate Transparency Act has encountered delays along the way, the timeline for compliance is rapidly approaching. It is paramount for companies to prepare diligently and ensure they meet the reporting obligations defined by the CTA. By leveraging the expertise of Athennian, organizations can streamline their processes, ensuring a seamless transition while strictly adhering to the CTA's timeline and requirements. Let us help you navigate this path towards compliance changes and stay ahead in an evolving, more transparent business landscape.
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