As previously discussed here, Congress recently enacted the Corporate Transparency Act (the “Act”) to amend the Bank Secrecy Act by requiring businesses to file information about their beneficial ownership. Pursuant to the Act, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has until January 1, 2022 to adopt regulations and establish a private national database for information collected under the Act.
On April 5, 2021, FinCEN took one of the first steps in the process to develop the regulations by publishing an advance notice of proposed rulemaking (the “Notice”). The Notice provides the relevant portions of the Act, puts forth questions for discussion and invites the public to provide written comments to the Act in general and in response to FinCEN’s questions. The comment period is open until May 5, 2021. In a release, FinCEN “strongly encourage[s] all interested parties, particularly those that would be affected by the beneficial ownership information reporting provisions or would seek access to reported beneficial ownership information, to submit written comments. Such written comments will help inform FinCEN’s implementation of all aspects of the beneficial ownership reporting rulemaking. ” Following the notice and comment period, FinCEN will review the submissions prior to developing the regulations.
Prior to January 1, 2022, businesses should review regulations as and when promulgated by FinCEN to understand how the Act will be implemented and how it may apply to them, including whether they must file a beneficial owner report or are eligible to file for an exemption. Additionally, companies should keep updated records of the required information for each owner and enhance their compliance processes to ensure that the required information is being collected and reported to FinCEN in accordance with the Act.
Companies should also include language in their shareholder, partnership, or operating agreements or similar documents requiring their owners to regularly provide any information required to comply with the Act and any relevant regulations. Additionally, companies may want to consider indemnification provisions in such agreement if an owner fails to timely provide required information or provides false or incomplete information. If such agreement contains a confidentiality provision, it should include an exception to permit the company to report the required information to FinCEN.
For further information or guidance on revising your policies, procedures, and operating agreement, please contact David Paseltiner.