Since the Corporate Transparency Act took effect on January 1, 2024, how concerned are U.S. businesses about its introduction, and how aware are they of its specific requirements?
To gauge views regarding the introduction of the Corporate Transparency Act (CTA), CSC commissioned independent research among 200 general counsels, corporate secretaries, and other senior in-house legal and compliance executives from a broad range of industries. The full results can be found in CSC’s exclusive new report, The Corporate Transparency Act: Readiness, Concerns, and Implications.
Originally enacted in January 2021 as part of the 2021 National Defense Authorization Act, the CTA seeks to protect national interests and prevent “malign actors” from concealing their ownership of corporations, limited liability companies (LLCs), or similar entities in the United States to engage in illicit activity. The CTA requires corporations, LLCs, or similar entities that fall under the definition of a “reporting company” to submit a filing to the Financial Crimes Enforcement Network (FinCEN) including information regarding the individuals who directly or indirectly own or control a company.
Since taking effect, CTA regulation is causing concern for U.S. businesses
Reporting companies created before January 1, 2024, must file their initial Beneficial Ownership Information (BOI) report by January 1, 2025. But as our research clearly illustrates, CTA compliance is new territory for U.S. businesses, with many moving parts and some uncertainty as to what information is required.
Strikingly, it found that a significant majority (83%) of respondents are concerned about their organization’s CTA compliance (just 1% had no such concerns). Over three-quarters (76%) of those we surveyed also said they believe the CTA is causing concern more broadly among U.S. companies.
These findings underline the level of concern around the CTA’s introduction that the CSC team is also hearing from clients daily. Most organizations do not currently feel prepared for complying with CTA regulations and their understanding of BOI filing requirements is still maturing.
The subjectiveness of some provisions is causing uncertainty
From our conversations with clients, it’s clear that the subjectiveness of some provisions within the CTA is causing uncertainty. Clients are grappling with two main questions—is my company subject to the CTA, and, if so, who must be identified as beneficial owners?
Indeed, we have found the main area open to interpretation is the definition of beneficial owner. FinCEN guidance allows for businesses to determine who does or doesn’t meet the subjective definition; the onus is on the reporting company to decide.
Awareness of CTA reporting requirements is relatively low
Reflecting the degree of uncertainty among organizations around the CTA, our research found that:
- Less than half of respondents said they’re aware of the CTA reporting requirements
- Just under 40% are aware of the CTA reporting deadlines
- Only one third of those surveyed are aware of the CTA exemptions
When respondents were asked to prioritize the steps required to ensure compliance, “greater use of outsourced external specialists and dedicated platforms” was among the top priorities.
Given the level of concern around the CTA, how can CSC help?
CSC has been assisting with ultimate beneficial ownership filings in 12 international jurisdictions with requirements similar to the CTA.
CSC offers an end-to-end filing service in which our dedicated team will coordinate any necessary outreach, securely collect the information and documents required for reporting, and prepare and file the BOI report with FinCEN on your behalf.
Our full-service framework reduces administrative burdens and mitigates risk, allowing you to focus on higher-value, strategic work. CSC is your trusted partner, bringing unmatched expertise to close the knowledge gap, ensuring that you and your clients have the support you need.
To learn more, download CSC’s full report, The Corporate Transparency Act: Readiness, Concerns, and Implications here.
