CTA — Corporate Transparency Act

The Corporate Transparency Act (CTA) is a US federal law designed to combat money laundering, terrorist financing, tax evasion, and other illicit activities facilitated by anonymous shell companies. The law was enacted on 1 January 2021 as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021 and took effect on 1 January 2024.

The CTA requires certain companies (reporting companies) to report Beneficial Ownership Information (BOI) — information about their beneficial owners — to the Financial Crimes Enforcement Network (FinCEN). A beneficial owner is any individual who directly or indirectly holds at least 25% of the ownership interests or exercises substantial control over the company.

Implementation of the CTA has been marked by significant legal challenges. In March 2024, a federal court in Alabama ruled the law unconstitutional. Following multiple injunctions and Supreme Court intervention, FinCEN published an interim final rule on 26 March 2025 that fully exempts US-formed entities from BOI reporting requirements, limiting the obligation to foreign entities registered to do business in the United States.

Since the 2000s, law enforcement agencies and international organisations such as the Financial Action Task Force (FATF) had urged the United States to improve transparency in company formation. On 1 January 2021, the CTA was enacted as part of the NDAA 2021 — Congress overrode a presidential veto by President Trump. FinCEN published the final rule on BOI reporting on 30 September 2022, effective from 1 January 2024.

On 1 March 2024, the US District Court for the Northern District of Alabama ruled in National Small Business United v. Yellen that the CTA exceeded Congress's constitutional authority. In December 2024, a Texas federal court in Texas Top Cop Shop v. Garland issued a nationwide injunction. On 23 January 2025, the Supreme Court stayed the injunction and allowed interim enforcement. However, a separate nationwide injunction in Smith v. U.S. Department of the Treasury kept the reporting obligation paused until FinCEN later stayed it. On 26 March 2025, FinCEN published an interim final rule fully exempting US-formed entities and limiting the reporting obligation to foreign entities registered in the US.

Following the interim final rule of 26 March 2025, the scope of the CTA has been significantly narrowed:

• Foreign reporting companies (currently subject to reporting): Foreign entities formed under foreign law and registered to do business in a US state or tribal jurisdiction — unless they meet one of the 23 exemptions.
• US entities (exempt since March 2025): All entities formed under US law — including LLCs, corporations, and similar legal forms — are fully exempt from BOI reporting requirements under the current interim final rule.
• Exempt entities (23 categories): Publicly traded companies, banks, credit unions, insurance companies, registered investment companies, tax-exempt organisations, large operating companies (over 20 employees, over USD 5 million in revenue, US presence), and other regulated entities.
• Note: FinCEN has announced it will issue a revised final rule. The ultimate scope is subject to change.

• Beneficial Ownership Information (BOI) reporting: Reporting companies must submit information about each beneficial owner to FinCEN: full legal name, date of birth, current residential address, and identification document (e.g. passport or driver's licence).
• Company applicant information: For companies formed after 1 January 2024, information about the company applicants must also be reported.
• Filing deadlines (for foreign entities): Foreign entities registered before 26 March 2025 must file by 25 April 2025. Those registered afterwards have 30 calendar days from receiving notice of effective registration.
• Update obligation: Changes to reported BOI must be updated within 30 days of the change.
• FinCEN Identifier: Beneficial owners may apply for a FinCEN Identifier that can be used in place of personal information in subsequent filings.
• Confidentiality: BOI data is stored in a secure, non-public database accessible only to authorised government agencies and financial institutions (with the company's consent).
• Penalties: Wilful violations of reporting requirements may result in civil penalties of up to USD 591 per day (statutory base of USD 500, inflation-adjusted since 2024) and criminal penalties of up to USD 10,000 and 2 years' imprisonment.

The entry states a civil penalty of 'up to USD 500 per day' (statutory base). FinCEN adjusts this annually for inflation; since 2024 the maximum daily penalty is USD 591.