target audience: TECH BUYER Publication date: Mar 2024 - Document type: IDC Perspective - Doc Document number: # US51937924
Corporate Transparency Act Compliance
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Abstract
This IDC Perspective discusses the history of efforts to help prevent money-laundering activity that uses legal entities and the potential obscuring of the identities of individuals who are beneficial owners of those legal entities. To date, the results of those efforts have not been as successful as the regulatory authorities had hoped they might be, which is why the Corporate Transparency Act (CTA) was developed and has recently been put into effect.
There are some skeptics, as well as outright critics, of this new regulatory requirement, making it necessary for nearly all legal entities registered and domiciled in the United States (there are some exemptions) to complete and submit a beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). While most agree that the objective is a noble one, some feel that this is an example of regulatory overreach, and others have reservations about the potential to succeed with respect to the desired objectives.
If additional efforts to inform those legal entities, and their beneficial owners, which are required to comply with the new regulation, are not undertaken in the immediate future, it seems likely that CTA compliance is going to be well below regulatory expectations for BOI reporting compliance. This gap between CTA regulatory requirements by FinCEN and compliance with those regulations could result in a significant number of fines for millions of small businesses and other legal entities in the United States.
"Given the new, and significant, requirements to comply with the Corporate Transparency Act, millions of businesses will likely need assistance in meeting, and maintaining, their beneficial ownership information reporting requirements to the Financial Crimes Enforcement Network," says Sean O'Malley, research director, IDC Financial Insights: Worldwide Compliance, Fraud and Risk Analytics Strategies.