The enactment of the US Corporate Transparency Act (CTA) has had a significant impact on the private equity sector and portfolio companies. Even though the Act provides ample exemptions for financial services and investment institutions, it creates friction for many organizations developing their portfolios and creating new entities.
Businesses have long been able to operate in the U.S. without needing to disclose vital information on their ownership, management, and operation. With the implementation of the Final Rule of The Corporate Transparency Act Regulations, that freedom will soon be a thing of the past. The Final Rule is a major update to U.S. anti-money laundering legislation, and compliance will be obligatory for both existing and new companies. Breaches may result in severe penalties.
The U.S. Corporate Transparency Act (CTA), enacted on January 2021, has created additional reporting obligations for legal entities who now have to disclose their ultimate beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The new law targets the practice of using shell companies to hide illicit activities and will affect over 25 million existing legal entities, as well as all new entities opened after the regulation comes into effect.