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Understanding the Corporate Transparency Act

Deborah Hubbs, Attorney & Counselor at Law, PLLC  Dec. 11, 2023

Running a business is no small feat—it requires a tremendous amount of effort, dedication, and perseverance. From managing daily operations to handling financial pressures and employee issues, it's a whirlwind of tasks that demand your attention and knowledge. 

On top of these responsibilities, staying on top of the ever-changing landscape of legislation can be an uphill battle. That's why having a trusted business lawyer in your corner is essential. I'm based in Houston, Texas, and I can break down what you need to know so you can focus on your business.  

The Corporate Transparency Act, a part of the Anti-Money Laundering Act of 2020, is one piece of legislation that needs to be understood. This Act aims to crack down on anonymous shell companies often used for illicit activities by requiring businesses to report beneficial ownership information. Understanding these regulatory changes and their impact on your business is essential to ensure compliance and sidestep potential penalties. 

As your legal counsel, my priority is to help you understand these changes without wasting your time. With years of experience serving as in-house counsel for companies throughout Harris County, Montgomery County, and Fort Bend County, Texas, I understand the pressures you face and the goals you strive to achieve. Let's work together to ensure your business thrives amidst these legislative shifts at my firm, Deborah Hubbs, Attorney & Counselor at Law, PLLC. Read on to get a foundational understanding of The Act, and feel free to reach out with any questions.  

The Corporate Transparency Act: What You Need to Know 

The Corporate Transparency Act is a significant part of the Anti-Money Laundering Act of 2020, designed to eliminate the misuse of anonymous shell companies for illicit activities such as money laundering. It mandates the collection of beneficial ownership details for various types of entities, including corporations, limited liability companies, and foreign entities conducting business in the U.S. 

The beneficial owners are those who directly or indirectly hold 25% or more of the equity interests in a reporting company, or individuals with significant control over the company. The required information about these beneficial owners includes their full legal names, dates of birth, addresses, and identifying numbers. This requirement is not just a formality—it's a critical step toward ensuring transparency and accountability in your business operations. 

Its Importance

So why is this act important? It aims to crack down on anonymous shell companies that have, unfortunately, been used for money laundering, terrorism financing, and other criminal activities. The Act requires businesses to report beneficial ownership information, which is then stored in a database within FinCEN. This database provides law enforcement agencies with access to beneficial ownership information to detect and prevent illegal activities.  

Ownership Information

It's worth noting that this ownership information will not be publicly available, but FinCEN is authorized to disclose the information to: 

  • U.S. federal law enforcement agencies, 

  • to certain other enforcement agencies (with court approval), 

  • non-U.S. law enforcement agencies, prosecutors, or judges (based upon a request of a U.S. federal law enforcement agency), and 

  • financial institutions and their regulators (with the consent of the reporting company). 

In addition, the Act also aims to reduce burdens on financial institutions and legal entity customers by revising FinCEN's Customer Due Diligence Requirements. 

Understanding these regulatory changes is essential for your business. But you don't have to unpack all the details on your own. As your legal counsel, I'm here to help you understand the implications of such changes.  

Cases of Non-compliance 

Now you might be wondering, what happens if a company doesn't comply? The Act provides for penalties in cases of non-compliance. Moreover, the collected beneficial ownership information can be shared with law enforcement agencies, financial institutions, and regulatory bodies, enhancing the ability to track and curb fraudulent activities. However, rest assured, there are measures in place to safeguard the security and confidentiality of the collected information. 

It's important to note that reporting companies must submit this beneficial ownership information to the FinCEN. The Act emphasizes coordination between federal agencies, states, and tribal governments for successful implementation. 

Recently, the Treasury released an Advance Notice of Proposed Rulemaking, inviting comments on the implementation of the Corporate Transparency Act. As a business owner, it's important to understand the implications of this Act, and ensure compliance to avoid penalties. 

Address Your Concerns With an Attorney 

As your legal counsel, I'm here to help you navigate these new requirements. My goal is to ensure that you're not just surviving, but thriving in the face of these regulatory changes. I'm here to provide practical, tailored advice that respects your time and adds value to your business. 

Understanding and complying with The Corporate Transparency Act is a critical part of maintaining transparency and accountability in your business operations. Remember, my firm— Deborah Hubbs, Attorney & Counselor at Law, PLLC—is just a phone call away if you need any assistance. Let's work together to keep your business on the right side of the law.