Memorandum to Client
(Corporate Transparency Act Compliance)

Summary

This template is a memorandum to provide your client with information regarding the Corporate Transparency Act of 2020 (as amended, the (CTA)) and with the regulations promulgated by the Financial Crimes Enforcement Network (FinCEN) thereunder. The memorandum discusses CTA "beneficial owner" reporting requirements and compliance therewith. This template includes practical guidance, drafting notes, and an alternate clause. As part of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L No. 116-283, Congress adopted the CTA. The CTA includes some of the most significant changes to the Bank Secrecy Act (BSA) and U.S. anti-money laundering (AML) laws in recent years. Those changes, in turn, will result in extensive changes to U.S. corporate governance. The CTA requires companies that are formed or registered to do business in the U.S. to file a beneficial ownership report with FinCEN – the Financial Crimes Enforcement Network of the U.S. Treasury Department. These beneficial ownership reports will enable FinCEN to assemble a massive database of beneficial ownership information. FinCEN will use its database to fight money laundering in cooperation with other U.S. law enforcement agencies. Although the FinCEN database will not be publicly available, FinCEN will make the database accessible to U.S. law enforcement agencies, U.S. financial institutions and some non-U.S. law enforcement agencies pursuant to proposed regulations that will govern access. FinCEN adopted a final rule to implement the beneficial ownership report provisions of the CTA on September 30, 2022 (the "Reporting Rule") that will take effect on January 1, 2024. The CTA, as implemented by FinCEN through the Reporting Rule, establishes a series of obligations for companies formed or registered to do business in the U.S. Filing deadlines under the CTA were enjoined as a result of two preliminary injunctions issued by federal courts. By February 18, 2025, both injunctions had either been stayed or lifted, so that they ceased to be in effect, thereby bringing the CTA back into full force and effect. The CTA’s implementing regulations would have required that reporting companies formed prior to January 1, 2024, file their initial BOI reports no later than January 1, 2025. Since that deadline had already passed by the time both injunctions were stayed or lifted on February 18, 2025, FinCEN announced that it was extending the January 1, 2025, filing deadline to March 21, 2025. On February 27, 2025, however, FinCEN announced that it “will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines.” FinCEN further announced that it “intends to issue an interim final rule” no later than March 21, 2025, “that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported.” As a consequence of this announcement, although the CTA and the current Reporting Rule remain in effect, practitioners should consider the practical impact of FinCEN’s announced plan to forbear from enforcement and the impact of potential revisions to the Reporting Rule in the near future. The guidance and deadlines referenced in this Article, relate to the CTA and the Reporting Rule as they are currently in effect and do not speculate on the potential impact of any extended filing deadlines other revisions to the Reporting Rule. For more on the CTA, see The Corporate Transparency Act and Beneficial Ownership Reporting Requirement, Complying with the Corporate Transparency Act Checklist, Compliance with Corporate Transparency Act Clause (Operating Agreement) (LLC), and Corporate Transparency Act (CTA) Resource Kit.