A U.S. law that was enacted in 2020 under the Anti-Money Laundering Act (AMLA), the Corporate Transparency Act (CTA) is effective from January 2024. The purpose of the act is to prevent the abuse of anonymous entities for financial crime. The act requires your company to submit Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN) to identify people who own the company or control it. In this blog post, we’ll talk about the importance of the CTA, potential penalties for non-compliance, and the details of acting according to the act.
What Is the Purpose of the Corporate Transparency Act (CTA)?
The primary goal of the CTA is to prevent the usage of shell companies, increase corporate transparency, and overall improve the U.S. financial system. Shell companies are dangerous since they can be used for crimes like money laundering, tax evasion, and terrorist financing and the CTA is paying more attention to the companies because of it. The CTA requires the disclosure of the beneficial ownership information, therefore, creates more effective AML/CFT investigations. The act also is helpful for aligning the U.S. with FATF Recommendation 24. The recommendation calls for transparency in company ownership, which strengthens the fight against financial crime.
What Is Beneficial Ownership Information (BOI)?
Beneficial Ownership Information (BOI) is the details that identify the individuals that own or control of a company. Since the U.S. CTA requires companies to submit BOI to FinCEN, your company should be collecting and sharing these details to increase corporate transparency. The required details are the beneficial owner’s full name, date of birth, residential address, a government-issued identification number, and a clear image of the identification document.
Who Must Report Under the Corporate Transparency Act?
Most legal entities are subject to reporting to officials under the CTA. Corporations, limited liability companies (LLCs), limited partnerships (LPs), and similar companies that operate in the U.S. were required to report before March 21st 2025. Also, foreign entities that operate in the U.S. are not exempt from this, they should also report accordingly. The CTA aims to ensure that both domestic and foreign entities are reporting accordingly to ultimately reduce the usage of shell companies for crimes.
In an interesting turn of events, in December 2024, a U.S. federal district court in Texas issued a nationwide preliminary injunction stopping enforcement of the CTA (particularly BOI reporting requirements). The court has declared that the CTA BOI reporting was hurting the anonymity several states provide for companies.
As another update, on March 21st 2025, FinCEN published an interim final rule that exempts U.S. domestic reporting companies and U.S. persons from the requirement to submit BOI under the CTA. The rule narrows the definition of “reporting company” to foreign entities doing business in the U.S. Only those foreign entities are required to report (and even for them, U.S. beneficial owners may be exempt). The update comes after the lawsuits going on in the country regarding CTA.
Who Is Exempt from CTA Reporting?
We’ve established that most U.S. and foreign entities are required to report under the CTA, but there are 23 categories of companies that are exempt from this reporting. Exempt entities include publicly traded companies registered with the SEC, banks and credit unions, money services businesses (MSBs), insurance companies, securities brokers and dealers, investment advisers, accounting firms, and registered non-profits. Another qualifying category is large companies if they meet criteria like employing more than 20 staff in the U.S., maintaining a physical office, and reporting over $5 million in annual gross receipts or sales. Your company should be able to self-assess your eligibility for exemption and keep records about it because FinCEN doesn’t involve itself with the process.
When and How Must BOI Be Reported to FinCEN?
Let’s talk more about the specifics of BOI reporting. If your company was formed or registered before January 1st 2024, you had until the same day next year to file your initial BOI report. If your company was formed or registered before January 1st 2024, you should be filing within 90 calendar days after forming the company. The deadline is shortened to 30 days after January 1st 2025. You should also be reporting any changes of BOI, like a new beneficial owner, updated address, or changes to identifying documents, to FinCEN in 30 days within the change. The reports should be fined electronically using FinCEN’s BOI E-filing System. Your non-compliance might lead to several penalties. The January 1st 2025 deadline imposed by the CTA was moved to March 21st 2025 because of the Texas case we’ve mentioned above leading to uncertainties in the continuation of the act. This deadline being moved gave companies more time to report, although a final decision wasn’t reached regarding the case.
How Does CTA Reporting Support AML Compliance?
You might be wondering what good will reporting to CTA do for your company. The first benefit CTA reporting brings is closing ownership gaps that criminals exploit for money laundering and terrorist financing. The information also helps strengthen customer due diligence (CDD) and enhanced due diligence (EDD) process that are used in banks, fintechs, and other similar reporting entities. The reporting will help verify the true owners of accounts and transactions, helping both your company reach compliance and regulators catch criminals. One other benefit is that the reporting will help regulators in tracing shell companies, identify hidden financial networks, and respond quickly when it comes to suspicious activity.
What Are the Penalties for Failing to Comply with the CTA?
There are several penalties waiting gfor you if you’re not compliant enough with the CTA. Civil fines for late or incomplete filings of BOI can go up to $10,000, with the daily fine being $500. Willful non-compliance is a more serious crime that can get you more severe penalties. Some examples of this are intentionally providing false information and deliberately failing to report. Criminal penalties are given for these offenses, and it can lead up to two years of imprisonment. The importance of collecting and sharing BOI with FinCEN is shown once again through these potential penalties you can get for non-compliance.
In June 2025, a bill was introduced called “FinCEN–SBA Coordination on Beneficial Ownership Registration Act” in both the House and Senate, designed to help small businesses comply with CTA/BOI reporting, presumably by providing coordination and resources. Guidance like this will help figure out the details of compliance regarding BOI.
How Should Companies Prepare for CTA Compliance?
There are several actions to take in order to ensure you are complying with CTA rules. The first step is to identify all beneficial owners. Any natural person who directly or indirectly owns or controls 25% or more of your company is counted as a beneficial owner and you should be providing them in BOI reporting. The collecting of identification documents like government-issued IDs, dates of birth, and adresses should follow suit. Your company should be verifying these information accordingly. Our Sanction Scanner experts advise you to appoint a dedicated compliance officer or legal counsel to help oversee BOI collecting, filing, and updates. The last step is the maintainance of secure logs and audit trails of BOI records and updates.
How Does Sanction Scanner Help with CTA-Linked AML Processes?
We at Sanction Scanner can support your company with your CTA compliance journey. Sanction Scanner offers AML solutions that not only meets obligations, but makes it easier and more efficient. Your company can screen beneficial owners against global and domestic PEP, sanctions and watchlists using Sanction Scanner, ensuring that you identify high-risk customers during onboarding. Our platform automates CDD and EDD processes to make sure everything is well-documented and compliant with regulations. Audit-ready BOI reports are also offered by Sanction Scanner. These reports will be helpful during regulatory reviews or inspections of your company. We can also track changes in ownership structures in real time which helps update BOI accordingly without getting fined for delays.
FAQ's Blog Post
The Corporate Transparency Act is a U.S. law requiring companies to report beneficial ownership information to FinCEN.
The Act was introduced to fight money laundering, terrorist financing, and the misuse of shell companies.
Most U.S. corporations, LLCs, and similar entities must file beneficial ownership reports.
Beneficial ownership reporting discloses individuals who own or control at least 25% of a company.
Companies face civil fines, criminal penalties, and possible imprisonment for failing to report.
Small businesses must comply with new reporting rules but are given exemptions in limited cases.
Sanction Scanner helps firms collect, verify, and monitor beneficial ownership data in line with CTA requirements.
