With the release of the “Pandora Papers,” there is renewed attention on transparency in corporate ownership. Earlier this year, Congress passed the Corporate Transparency Act (CTA), to combat the use of shell corporations in money laundering, financial fraud, and other illicit or corrupt activities. The Financial Crimes Enforcement Network (FinCEN), the enforcement arm of the U.S. Treasury, is working to release associated regulations by December 31, 2021.
The CTA primarily addresses:
- Section A: certain new and existing small corporations and limited liability companies are required to disclose beneficial ownership information. If an entity fails to file or update filings of beneficial ownership, or provides misleading information, an entity faces civil as well as criminal penalties.
- Section B: revises requirements related to anti-money laundering and counter-terrorism-financing laws. It establishes new financial regulatory agencies, creates programs to enable foreign and domestic outreach, and allows for increased information sharing between various agencies and revises whistleblower incentives. This section also increases penalties for violations of anti-money-laundering and counter-terrorism-financing.
For more detailed information on the Corporate Transparency Act of 2019, click here.
Given the present administration’s emphasis on financial transparency, the Pandora Papers are likely to act as a catalyst for the US’s implementation and enforcement of the CTA. The Pandora Papers are also likely to add urgency to the Department of Treasury’s rollout of CTA regulations.
Authored by Priyanka (Pree) Wakharkar, CPA, CA.
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