Corporate Transparency Act: I’m still alive but I’m barely breathin’
There have been numerous developments since my recent piece, "What Katy Perry Can Teach Us About the Corporate Transparency Act," which traced the “Hot N Cold” legal developments of the Corporate Transparency Act (the “CTA”). Keeping up with these changes has been difficult and, frankly, not very rewarding due to the constant shifts.
But, with the interim final rule issued by the Financial Crimes Enforcement Network (“FinCEN”), the status of the CTA can be aptly described using lyrics from “Breakeven” by The Script: “I'm still alive but I'm barely breathin’." This song is arguably one of the best to listen to during heartbreak—similar to how the drafters of the CTA might feel seeing their efforts unravel.
“What am I supposed to do when the best part of me was always you?”
Under the interim final rule, all domestic reporting companies are exempted from the reporting requirement and do not have to update or correct any beneficial ownership information (“BOI”) previously reported to FinCEN. This undermines the primary purpose of the CTA, which Congress outlined as preventing “malign actors [from hiding] their ownership of corporations, limited liability companies, or other similar entities in the United States to facilitate illicit activity, including money laundering, the financing of terrorism, proliferation financing, serious tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption, harming the national security interests of the United States and allies of the United States.”
Requiring US entities to report BOI was always the best part of the CTA and now it’s gone.
“Now I'm tryna make sense of what little remains”
The only thing that remains is the requirement that foreign reporting companies reports BOI, but foreign entities are only subject to the CTA if they register to do business in the United States. If a foreign entity is involved in illicit activities in the United States, how likely is it that they would register to do business there?
Also, foreign reporting companies do not have to report BOI of any US persons.
“I'm still alive but I'm barely breathin’”
The CTA is still technically in effect, but it has little practical significance after the interim final rule.
The bottom line here is that FINCEN is washing its hands of this mess until Congress takes further action to either amend the CTA or to take some other action to force a broader enforcement of that statute.
