The new bipartisan Corporate Transparency Act is designed to “crack down on money laundering and … shadow money” by giving federal financial crimes law enforcement more visibility into business ownership according to Corinne N. Sprague, a partner with Warner Norcross + Judd LLP who discussed the new legislation in this week’s edition of Crain’s Grand Rapids Business.
The bipartisan legislation, which is set to take effect Jan. 1, 2024, if it survives a federal court challenge and pending legislation that could delay its effective date, requires legal business entities to report who has “beneficial ownership” and “substantial control” to the U.S. Department of Treasury’s Finance Crimes Enforcement Network, or FinCEN. Sprague said the U.S. is playing catch up to the European Union and other countries in an effort to crack down on the use of shell companies used to masquerade money laundering, terrorism financing and other illegal activities.
“You don’t actually have to have any equity ownership to be a ‘beneficial owner’ under this statute,” Sprague told Crain’s. If there’s a CEO of a business that doesn’t have any equity at all, that CEO is still going to be reported to FinCEN as a ‘beneficial owner’ because of their ability to make important decisions on behalf of the entity.
“There are a lot of different ways different people can get pulled in under the ‘beneficial owner’ definition.”
Businesses, family offices and individual entrepreneurs should review their ownership interests to determine whether their entities will be required to comply and, if so, the individuals whose ownership or control must be reported to FinCEN.
Crain’s Grand Rapids Business subscribers can read the full article here.
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