I'm here today to talk about the Corporate Transparency Act. This act was passed January 1st
of 2020 and the idea is that the US Department of Treasury, the Financial Crimes Enforcement Network
or "finCEN" is going to be collecting information on every LLC, corporation and LP in the country.
The purpose is to combat money laundering but this new requirement is going to involve a lot
of work for every business owner, real estate investor, using an LLC and every other holder of
a corporation or an LLC so you're going to have to make annual filings and reveal pretty significant
information. The idea is that the US treasury is going to collect the following information,
they want to understand who the beneficial owners are of companies and you need to name, under this
new law, you need to name who owns or controls 25 of the company or exercises substantial control
over the company. Now the US treasury department has put forward proposed rules, the final rules
aren't here yet but the proposed rules have not said what does substantial control mean? So we're
going to have to wait until the final rules come out to understand what does substantial
control mean. Well someone who's a president of a company, someone who's on the board of directors
may have substantial control. You're going to have to reveal who those people are. But other people
down the line may have substantial control and we don't know yet who has to be identified under
this provision. Also when it comes to 25 percent ownership we don't understand - we don't really
know yet whether that applies to just equity owners, could it apply to people with a profits
interest who is a 25 percent owner? We don't know yet, but the federal government is very intent
upon collecting this information. The required information of a beneficial owner is the name,
the birthdate, the address of the individual, and the id number - a driver's license or passport.
And that's not enough, they want an image of the driver's license or passport so you're
going to have to provide that image along with the information we just mentioned, to the US treasury
department every year. You're gonna have to file that on an annual basis and you're also going to
have to provide the information on the company that assists you in this effort. Our company,
Corporate Direct, is looking to assist our clients and provide this service.
We'd rather not provide this service, this is a huge burden on everybody in the country
so my preference would be that the US government didn't collect this information. For me it's
of concern because this type of information seems to leak out to the public. The IRS recently had
information taken from their database, handed over to the press and the IRS documents are supposed to
be confidential, and this information got out and no one has been held accountable for it.
It's been swept under the rug and so the idea that this information is going to be secure
and no one is going to know who owns these companies, I'm not convinced that the federal
government has the ability to prevent a hack. The government gets hacked all the time. They
say this information is secure but look around you, there are all these hacks of government
agencies and files and I just wonder how protected this all this information will be. But these are
the requirements that congress has put upon us and our job is to help our clients follow the law,
so while I don't agree with the law, I'm going to assist all our clients in following the law.
The penalties for failing to file with the US treasury department are $500 a day for civil
penalties. If it's considered criminal, if you're doing this willfully to keep information from the
government, you could face fines of $10,000 and up to two years in prison, so we want to make
sure that our clients follow these rules, just so they don't have to go to prison for something that
they didn't even know they were supposed to do. So that's why we're getting this video out there, you
need to know this is coming and the fines are very significant if you don't follow these rules. Now,
the act also says that if anyone hacks this information and we, as we've said that
people do hack these government databases and if someone does hack it and release the information,
we'll see if anyone is ever punished because they haven't been so far, but if you hack this
information the fines are $250,000 and up to five years in prison so the government is saying we're
going to protect this information and we're going to send people to prison for a long long time, but
we'll see if that actually happens. Now, who has access to this information? Hopefully it's secure
and the government has said that the people who have access to this information will be
federal law enforcement and intelligence agencies so think of the FBI and the CIA, all right. State
and local law enforcement will be able to access this information, with a court order, so you know,
someone's investigating a company and they want to know who the owners are and, oh, by the way the
federal government has this information. State and local enforcement will be able to find out
who owns the company. Foreign law enforcement will be able to access this information so you know,
one of the government claims is the need, the reason we need this information is because there's
so much money laundering going on in our system. Well if that's accurate the foreign agencies MI5
or the other federal agencies will be able to use this database to find out information on their
citizens. The other access will be through US banks with the permission of the customer. So you
know you're going to set up an entity and you're going to open a bank account and you're claiming
that this entity is owned by a second entity, the bank could go to finCEN with your permission
and gain information on what you've filed, and you're going to file under penalty of perjury
so the information is going to be accurate. You're not going to fudge on this filing, the penalties,
as we mentioned are significant so you're going to tell the truth on this form and the bank
will be able to rely on that information because the penalties are so significant.
Alright, the timeline for the corporate transparency act compliance it's a little
bit vague, the treasury department just released rules saying that they're going into the proposed
rule-making session and so they're soliciting comment from individuals on all of this and the
comment period ends February 7th, 2022. And so you could have the the US treasury department work at
light speed and release the rules after February 7th, 2022. It usually doesn't happen that quick
but it could and so if they set up the rules as of February 8, 2022,
if you're a new entity after that February date, you have to report the information
within 14 days. If you're an existing entity you have to report the information within a year
from the proposed, or rather the final regulations. So let's say the final regulations
are not out at government light speed in February of 2022, but it's more like September of 2022.
If you're forming a new entity after that date you have to file the information within 14 days.
If you were existing prior to September of 2022 or whatever date the the final rules come out,
you've got a year to file that information. We'll be helping our clients with the filings but it's,
it may be prudent if you know you're going to need an entity in 2022 to file it now, just so we have
more time to understand the rules and understand how to comply with these rules. If you form your
entity the day after the rules come out and you've got to file within 14 days that may be quick,
that may be something that could become a bit of a burden. So if you know you're going to file an
entity and you need an entity in 2022, I would do it sooner rather than later, but the key thing is,
unless your congressman hears enough, gets enough letters from people saying this is a stupid idea
that everybody in the country needs to file this every single year to combat money laundering.
If congress heard that message maybe they would change the law but until that happens we have
to follow the law and we will assist people in providing this information to the US department
of treasury. Now it gets interesting if you have a Wyoming LLC. You're going to have to reveal who
the beneficial owners and the people with control are, but let's say the Wyoming LLC is owned by two
Nevada LLC's. You're gonna have to provide the information on who controls those and so you
could have a chain of LLCs that are going to have to provide this information. So what I'm saying is
you can't set up one Wyoming LLC and just provide that information to the treasury department. We're
going to have to provide the information on every single LLC that is part of that chain of asset
protection. So this is a comprehensive rule. It's going to involve a lot of work for CPAs, firms
like ours, Corporate Direct, that are going to provide this service, and a lot of work for you.
You want to make sure that you file this properly. You want to give them the proper information
every single year if there's a change in your information. If you own a LLC that's
a hundred percent owned by you and you bring in a partner, who all of a sudden has 30 percent,
you've got to identify that change to the US treasury department. So just understand that this
is going to involve a lot of work for all of us and the federal government, they understand this
and they have set the penalties so high and so onerous that you're going to follow. So, you know,
just be aware that this is coming and we're going to take the steps to comply with the law
until enough people complain and congress changes it. So the corporate transparency act is with us
we're gonna have to follow it and we're here to help you with that. Good luck.