For a long time, US laws allowed for the creation of shell corporations that did not require to reveal their owners. One could easily open a company in states as Delaware, South Dakota, Wyoming, Nevada or Montana in complete anonymity. Law enforcement agencies have asked US government many times to oblige these companies to disclose their beneficial ownership.
Most countries already put an end to corporate anonymity by first abolishing bearer shares and subsequently requiring beneficial owners to fully disclose their identity.
In the EU, this led to the creation of so-called ‘UBO’ registers (Ultimate Beneficial Owners). In these countries, including Belgium, the data of the beneficiaries is accessible not only to the authorities, but also to the general public, with some limited exceptions to that rule.
In January 2021, Congress passed the National Defense Authorization Act, which includes the Corporate Transparency Act (‘CTA’). The CTA requires all US businesses to file beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury Department. The CTAs sole purpose is to ban anonymous shell companies that are used to hide corrupt proceeds and other illicit financing.
In the context of the CTA, the reporting requirements are broad and apply to existing corporations, LLCs, and other similar entities as well as to newly incorporated entities. Some exemptions, however, apply for larger companies, heavily regulated companies, and companies that already provide such information to a relevant government agency.
The CTA requires companies to file a report that provides the name, date of birth, current address, and unique identification number (e.g. from a passport or driver’s license) of the company’s beneficial owners to FinCEN. This information must be updated every year to reflect any changes.
The CTA imposes new burdens on entities operating in the US and is likely to have significant implications for both foreign and domestic businesses. Clients should be aware of these new requirements to understand the full extent of their reporting obligations. Required compliance with the CTA does not start until January 2022, which is the deadline for Congress to enact the regulations.
Different from many EU countries, in the US, this information is not accessible for the general public. In this regard, the setup is very similar to that of countries like Switzerland, which reserves this kind of information to government agencies, as the only ones who have a legitimate reason to gain access to it when needed.
The information provided to FinCEN will thus only be available to US federal government agencies, like the Treasury Department (for tax administration purposes), the FBI and the likes, as well as financial institutions and non-US law enforcement agencies via their US federal counterparts. However, it is likely that through the use of Double Taxation Agreements (DTAs) and Tax Information Exchange Agreements (TIEAs), other countries in the world, including Belgium, that have entered into such bilateral agreements with the US could at some point indirectly benefit from this valuable source of information as well.