On April 16, 2024, Corporate Counsel quoted Kevin Shepherd on the Corporate Transparency Act and reporting requirements for businesses.
According to the article, a federal judge in Alabama ruled that the anti-money-laundering law is unconstitutional; however, the U.S. Department of the Treasury said that it will enforce the measure and expects organizations to file beneficial ownership information with the Financial Crimes Enforcement Network by an end-of-year deadline.
While “there was initial euphoria in the headlines that screamed ‘CTA Act Unconstitutional,’” Shepherd told Corporate Counsel, “the punchline is, if you aren’t a plaintiff in the litigation, you need to comply with the CTA as if the ruling hadn’t existed.”
According to the publication, firms are waiting for further clarity on the issue before updating filings.
Others are waiting as long as possible to comply, hoping for greater legal clarity before the deadline hits, according to Shepherd. “Affected business are waiting as long as possible just to see how things shake out between now and then,” he said.
However, waiting comes with some risk, as penalties can include fines of up to $10,000 and two years in federal jail, Corporate Counsel reports.
“The penalties are rather severe, so I wouldn’t let the deadlines pass,” Shepherd said. “FinCEN is probably in the education mode and will transition at some point from that focus to an enforcement focus. And FinCEN hasn’t shown any willingness or desire to modify the compliance deadlines.”
For companies, one of the most challenging aspects of compliance will be understanding what changes trigger a requirement to update their filings and staying on top of doing so. “If there’s a change in substantial control, if the CFO retires, you get a new CFO, you have to file a report, Shepherd continued. “If a passport changes, you have to report it. A lot of companies are trying to figure out how you monitor those changes.”
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