On January 1, 2021, Congress overrode former President Trump’s veto of H.R. 6395, the National Defense Authorization Act of 2021 (the “NDAA”). Title LXIV of the NDAA enacts the Corporate Transparency Act (the “CTA”). The CTA, among other things, requires every business entity that meets the definition of a “reporting company” to make a filing with the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) identifying its beneficial owner or owners. The CTA also imposes severe penalties on entities that fail to comply with its reporting obligation.
The CTA is designed to ban anonymous shell companies used by criminals and certain foreign officials to hide and move corrupt proceeds and other illicit financing. It represents the first significant update to the U.S. anti-money laundering laws in 20 years and gives FinCEN significant authority to adopt necessary regulations to implement the provisions of the CTA.