Risks of Non-Compliance
September 19, 2023 | Carole Clark Isakson
At Barna, Guzy & Steffen, our corporate practice group monitors developments related to the Corporate Transparency Act (CTA). We have addressed various aspects of the CTA in previous blog posts. We recommend reviewing those if you haven’t already done so. Today, we aim to highlight potential implications and risks of non-compliance.
Regulations and Disclosures
The Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Treasury Department, has recently proposed final rules related to the enforcement of the CTA. The bureau’s primary objective is eliminating corporate anonymity and hindering money laundering activities.
While the final regulations interpreting and giving detailed compliance instructions on the CTA are not yet available as of the date of this post, a person will be required to make disclosures to FinCEN starting on January 1, 2024, if the person:
- participated in forming a corporate entity; or
- owns more than 25% of an entity; or
- has significant control over an entity, such as making hiring and firing decisions at the C-suite level.
You will also need to report to FinCEN when there are changes to the information in the initial report, such as when you relocate or when the ownership or control of the underlying entity changes.
Significant Consequences of Non-Compliance
Any individual who intentionally supplies false information or knowingly fails to report complete or updated information could face a daily civil penalty of up to $500 until the violation is rectified. Additionally, the offender could be fined up to $10,000 and face imprisonment of up to two years.
We Can Help
Though many aspects of the reporting process and requirements remain uncertain at the time of writing this blog post, our corporate practice at Barna, Guzy, & Steffen is dedicated to staying informed about any changes to the CTA requirements. If you are a business owner or executive with concerns about CTA reporting requirements, our experienced corporate attorneys Carole Clark Isakson, and Scott Hagel are ready to assist you. Contact us today.
Update December 19th, 2024
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction in Texas Top Cop Shop, Inc., et al. v. Garland, enjoining the federal government from enforcing the Corporate Transparency Act (CTA) and its reporting deadlines.
On December 13, 2024, the Department of Justice (DOJ) filed an Emergency Motion for Stay Pending Appeal in the Fifth Circuit requesting an expedited briefing schedule and a ruling “as soon as possible, but in any event no later than December 27, 2024, to ensure that regulated entities can be made aware of their obligation to comply before January 1, 2025.” Reporting companies should continue monitoring developments in the coming days in case the January 1, 2025 deadline for filing is reinstated.