10 Step Corporate Transparency Act Compliance Program

Posted by Jennifer M. Settles, Esq.Apr 23, 20240 Comments

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) was passed as part of the National Defense Authorization Act on January 1, 2021, marking a significant step forward in US efforts to combat financial crimes.  The legislation, which went into effect on January 1, 2024, primarily applies to smaller companies with 20 or fewer full-time employees, or less than $5 million in annual revenue.

The CTA targets money laundering, terrorist financing, and other illicit activities by enhancing transparency in the ownership structures of "Reporting Companies" registered in the US.  Definitions and key aspects of the CTA  are described in our other Blog post

Under the CTA, Reporting Companies are required to report their beneficial ownership information (BOI) with the Financial Crimes Enforcement Network (FinCen), a bureau within the US Department of Treasury.    

Exemptions from BOI Reporting   

In addition to exempting qualifying large companies, the CTA also exempts from its applicability publicly traded corporations and companies which operate in heavily regulated industries such as banks, credit unions, broker dealers, insurance companies, accounting firms, and public utilities.  Also exempt from the CTA are tax exempt entities (such as 501(c)(3) corporations), governmental bodies, and subsidiaries of certain exempt companies. 

Given the high stakes, significant penalties, and potential for business and reputational harm for noncompliance with the CTA, it's critical for companies to develop a robust CTA compliance program as soon as possible.  This is especially important for organizations with multiple subsidiaries where tracking may be complicated, and for due diligence purposes for organizations who are considering entering into joint ventures or other equity partnerships or bringing in new Board members/decision-makers.   

Why Have a CTA Compliance Program? 

Legal Compliance

Per the CTA, Reporting Companies are required to file reports detailing their Beneficial Owners to FinCen.  Having a compliance program helps ensure that businesses meet these legal obligations timely and accurately, thereby avoiding penalties.

Risk Management

Establishing a robust CTA compliance program will help companies identify and mitigate risks related to money laundering and terrorist financing.  By keeping transparent records and understanding their own ownership structures, companies can prevent illicit activities and financial fraud from occurring under their purview.    A robust compliance program includes due diligence processes that scrutinize the backgrounds of potential business partners.  This process will help in identifying high-risk parties and prevent associations that might expose your company to financial and reputational damage. 

Operational Efficiency

Developing an efficient CTA compliance program will reduce the burden on internal resources and decrease the likelihood of errors.  Our 10-Step CTA Compliance Program outlined below will help in organizing and streamlining processes related to the collection, processing, and reporting of beneficial ownership information. 

Facilitating International Business

For companies that operate or transact internationally, compliance with regulations like the CTA aligns with global standards, facilitating soother cross-border transactions.   A CTA compliance program can help companies avoid international blacklists or sanctions associated with inadequate controls on money laundering and terrorism financing. 

10 Steps to Develop a Corporate Transparency Act Compliance Program 

  1. Develop an understanding of the CTA, including its applicability, disclosure obligations, and deadlines.   Read trusted sources about it; review FinCen's Q&As, seek legal advice.
  2. Identify your Reporting Companies, and each of their Beneficial Owners and Company Applicants.  Determine if any of the 23 exemptions from BOI reporting are applicable to your company(ies).
  3. Collect the required information.  See our Blog post for the required disclosures relating to Reporting Companies, Company Applicants, and Beneficial Owners.
  4. Develop internal processes.  Develop processes for how your business will vet prospective equity partners and decision-makers, and on collecting, updating, and reporting beneficial ownership information (BOI) to FinCen.  Establish an internal monitoring system to oversee these processes.
  5. File initial reports by the required deadlines.   Double-check that the information submitted is accurate and complete to avoid any penalties for non-compliance.
  6. Plan for ongoing compliance. Establish an internal process for the review of prior filings, and update them as needed.   Regularly review CTA updates from FinCen, including any changes in reporting requirements, timelines, or process.  
  7. Train your team.  Provide training for your staff on the importance of CTA compliance and on the procedures for collecting, reporting and updating information.  Also, develop a process for ensuring that personal information is protected with adequate security measures to prevent unauthorized access. 
  8. Review and audit.  Conduct internal CTA compliance audits to periodically review your processes and compliance with CTA requirements.  Consider having external auditors or legal counsel review your compliance procedures and filings.
  9. Make use of technology solutions.  Considering using technology platforms designed to assist in CTA compliance. 
  10. Prepare for potential legal issues. Be prepared to address any legal implications that might arise from your BOI disclosures or from non-compliance with the CTA.  Allocate a budget for potential legal issues or proceedings related to CTA compliance. 

The Law Office of Jennifer M. Settles helps companies understand their Corporate Transparency Act reporting obligations, prepares internal compliance programs, and files BOI Reports on clients' behalf.  Contact us today at (602) 617-3938 or through our website at, for more information.  

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