US on the road to transparency?

On January 1, 2021, the United States Congress (USA) approved the defense law that includes the Corporate Transparency Act (CTA) or corporate transparency law.

It aims to increase transparency regarding corporate structures in the US with the justification of combating money laundering and terrorist financing, being, perhaps, one of the greatest advances in recent years, in regarding this issue by the jurisdiction.

The support for the application of this regulation is based on the facts that at least 2 million companies are formed in the United States per year, and that the confidentiality that they offer regarding the identification of their final beneficiaries ( remember that most states do not require their reporting) has led to these structures being used in money laundering crimes, derived from drug trafficking, weapons and other precedent crimes.

It has even led to the U.K. name the US as the second most financially secretive jurisdiction in the world.

Although compliance with the CTA does not begin until January 2022, the deadline for the US Congress to enact its regulations, in general terms, the regulations establish the obligation to inform the beneficiaries of the American companies or societies. end of the same to the Financial Crimes Enforcement Network (FINCEN), the body in charge of carrying out financial intelligence in the United States, which will have to prepare a private registry in which all the information regarding said final beneficiaries.

Subjects required to report and information to provide

The CTA is focused on US Corporations, LLCs or similar entities (Companies), and establishes the obligation to report name, date of birth, address and identification number (for example, passport or identity document) of their final beneficiaries. at the FINCEN.

  • Final beneficiaries are understood to be individuals who directly or indirectly, through any means: Exercise control over the Companies, or;
  • They have a participation in the capital of at least 25% in them.

There are some exceptions, about which the communication of the aforementioned information is not necessary, they are:

  • In the case of minors, when the person supervising them has reported the information in some other way;
  • An individual acting as a trustee, intermediary, custodian or agent on behalf of another;
  • An individual acting as an employee whose control derives solely from his or her employment status;
  • An individual whose sole interest in the entity is through an inheritance right;
  • A creditor of the companies, unless said creditor meets the aforementioned final beneficiary requirements.


Scope of communication

The regulations apply to existing and new companies when they are duly formed. However, the CTA mentions some exceptions for which this provision would not be reached, these are:

  • Companies that employ more than 20 people, report profits of more than $ 5 million for tax purposes, and have a physical presence in the US.
  • Most financial services institutions, which already report information to a relevant government entity;
  • Churches, charities and other non-profit entities.

The times to carry out the report can be divided into the following:

  1. When one is recently formed, it must report the information at the time of formation or registration;
  2. Companies already existing before the regulation are expected to provide the information no later than two years after the effective regulation;
  3. Companies must update the information to FINCEN whenever there are changes in their final beneficiaries.


Information privacy

It is important to mention that there is protection of the data provided and that the CTA has taken important precautions regarding this matter, since the privacy of the information is one of the pillars on which this type of regulation is based.

It is established that the information must be stored by FINCEN in a private database, which is not accessible to the public, and may only be shared with:

  • A federal, state, or local agency conducting an investigation;
  • A federal agency making the request on behalf of a foreign government which must be covered by a mutual information exchange agreement upon request signed with the US;
  • A financial institution that is conducting a due diligence process under the Bank Secrecy Act (BSA) or the USA Patriot Act.


Penalties for non-compliance

Failure to comply with the CTA will result in civil penalties that will amount from USD 500 for each day that the obligation to report is breached, up to penalties of USD 10,000 or imprisonment for up to 2 years.

Also, and this is where the importance of maintaining the privacy of the information provided can be observed, they are stipulated for those who disclose information provided under the CTA without authorization (both for employees of government entities, and for third parties who may receive this information), civil fines ranging from USD 500 for each day to penalties that include the payment of USD 250,000 or imprisonment for up to 5 years.



Although the CTA regulation remains to be known (which is expected to be ready for January 2022), we can conclude that we are facing a historic event in terms of information transparency in the US. affirm that this is not due to fiscal issues or perhaps the main reason for the approval of the regulation does not lie in them, but rather that it has a preventive nature in relation to money laundering, originating from crimes such as drug trafficking or weapons, among others.

Therefore, it is possible to affirm that the USA still, and despite this norm, continues to be one of the jurisdictions that offers greater confidentiality and privacy in terms of the information of natural persons.

It is also necessary to clarify that the CTA does not include bank accounts in Financial Institutions of that jurisdiction and that the US has already approved regulations related to transparency and information exchange with very little impact on the effective implementation of exchange between countries. We will closely follow this regulation to inform you of the news in a timely manner.

Insight Trust has a team trained in matters related to the formation of Companies in the US and the regulations applicable to them, to request more information, a more personalized recommendation, a meeting with one of our advisors or a budget to contact to



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