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The Corporate Transparency Act & Your Business
What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is federal legislation that went into effect January 1, 2024. It requires most small and medium-sized businesses to file a Beneficial Ownership Information report. The report must disclose information about their beneficial owners - the people who own or control the company. This information must be submitted to the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Failure to comply with the CTA may carry civil and/or criminal penalties.
The purpose of the CTA is to prevent criminals from exploiting their ownership stake in American companies to covertly commit financial crimes. As the U.S. Department of Treasury’s CTA fact sheet explains, the law provides law enforcement and other relevant stakeholders with the necessary resources to prevent the financial anonymity that makes crimes like money laundering, drug trafficking, and terrorism possible.
Not all businesses are required to report under the CTA. The FinCEN website can tell you if your company qualifies for an exemption. If required to report, your company’s beneficial ownership information must be submitted to FinCEN electronically through a secure filing system.
Many small business owners are unaware of the CTA’s existence and its requirements. Consequently, scammers have begun to fraudulently solicit information from business owners or their employees for illegal purposes.
You may receive a letter or an email with a title like Important Compliance Notice. This correspondence may ask you to click on a URL or to scan a QR code. Do not click on any links or scan any QR codes. You should also refrain from providing personal or company information. These emails and letters are fraudulent. FinCEN does not send unsolicited requests.
Providing information to scammers could lead to business identity fraud in one of these ways:
- Financial Fraud – When a business is hacked through fraudulent filings. Thieves open new lines of credit, loans, or credit cards in the business’s name. They then file fraudulent uniform commercial code (UCC) financial statements.
- Web Defacement – Fraudsters impersonate a business with a fake website. They manipulate the legitimate business’s website to redirect traffic to their website and steal customer data.
- Trademark Ransom – Thieves obtain an email address similar to an existing business. They register a business’s name or logo as an official trademark and demand a ransom to release the business from the trademark.
- Tax Fraud – Fraudsters masquerade as a legitimate business by obtaining a federal employer identification number. They then file fraudulent returns using tax subsidies and obtain refunds through the federal or state government.
- Creation of fake LLC – A company with a similar name or the same name as your business is registered in another state. The fraudsters reroute company payments and mailings to the fraudulent LLC address. This results in large financial losses and security issues.
If you believe you or your business has been the victim of fraud, contact FinCEN at: