Corporate Transparency Act: Have You Reported Who Controls Your Company?

In 2020, the United States enacted a law called the Corporate Transparency Act (CTA). This law requires companies and corporations in the United States to report who their principal or central controlling owner is (Beneficial Owners). This refers to the person who holds control, i.e., the ability to direct the corporation’s activities. For example, holding at least 25% of a company constitutes control over the entire organization, including parent companies. Essentially, this is the person who ultimately benefits the most from the company’s operations, and whose decisions guide the entire organization.

It’s important to understand that enacting a law like the CTA in a country like the United States, which requires disclosure of controlling ownership, is not something to be taken for granted. In the U.S., protecting individual privacy from the government is one of the most significant issues in the American Constitution. With the rise of the internet and social networks, the debate on this issue has intensified, and today it is at its peak.

Still, the CTA was enacted, and with it came the requirement for every corporation or company to complete a government form and share sensitive details about private individuals. Why did the U.S. government pass the Corporate Transparency Act, and why is it so interested in knowing who the controlling owner is?

The Corporate Transparency Act is part of the U.S. government’s long-standing fight against money laundering. This issue is directly linked to phenomena such as organized crime, terrorism financing, white-collar crimes (like embezzlement), and other offenses. Often, the people behind these crimes launder money or receive funding (such as in the case of terrorism) through civilian companies or corporations.

For example, a crime organization might generate income from illegal activities like drug sales, but to use the money, it must launder it. Therefore, the organization establishes a company (or ties itself to an existing company), and injects the illegally earned money into its circulation by declaring fake sales.

The Corporate Transparency Act (CTA) is another step in the fight against money laundering in the U.S. Disclosing the details of the controlling owner is intended to allow authorities to quickly identify the individuals making decisions in suspicious organizations and to deter illegal activities. U.S. lawmakers decided this was a justified infringement on privacy, as the scale of money laundering in the United States is estimated to reach hundreds of billions of dollars annually.

If you have a company in the United States, chances are that you will also need to report details about your company’s controlling owner in accordance with the Corporate Transparency Act. To complete the form in the best possible way and avoid conflicts and fines from U.S. authorities, contact us.