Corporate Transparency Act: Requirements, compliance, and best practices
This article was reviewed by Emily Sachs, CAMS
Criminals have long used shell corporations — organizations without active business operations or assets, but which are registered as businesses — to obscure their finances and identities. By hiding these important details, it's easier for criminals to engage in illegal activities such as money laundering, tax evasion, and the financing of terrorist activities — while making it harder for law enforcement investigators to “follow the money” when there is suspicious activity.
The Corporate Transparency Act (CTA) is a US law that was designed to strengthen anti-money laundering (AML) regulations. It originally required over 30 million businesses operating in the US to report information about their beneficial owners. However, the Financial Crimes Enforcement Network (FinCEN) limited the reporting requirements when it adopted an interim final rule on March 26, 2025.
As of April 2025, the CTA requires companies formed under the law of a foreign country that are registered to do business in the US to file beneficial ownership information (BOIs) reports for each beneficial owner who isn’t a US person. US persons aren’t required to file BOI reports — even if they are beneficial owners of foreign entities. In this context, a US person includes individuals and several types of entities.
Below, we take a closer look at what the CTA is, why it was passed, and its key requirements. We also highlight the law’s exemptions, violations, and penalties, and discuss what this means for businesses.
What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a US law designed to make it more difficult for criminals to use shell corporations to engage in money laundering, tax evasion, and other financial crimes.
It attempted to do this by mandating the creation of a federal, nonpublic database that will contain information about beneficial ownership by non-US persons for all companies required to report it under the law. This database, maintained by FinCEN, can then be queried by certain government agencies, law enforcement, and financial institutions engaged in customer due diligence (CDD) and Know Your Customer (KYC) or Know Your Business (KYB) processes.
The CTA was signed into law in January 2021 as a part of the Anti-Money Laundering Act of 2020 (AMLA). Together, the CTA and AMLA were meant to update the nation’s AML regulations as the first major pieces of AML legislation passed in the US since 2004.
What are the Corporate Transparency Act’s reporting requirements?
Businesses subject to the CTA are known as “reporting companies” and include corporations and partnerships that are formed under the law of a foreign country and that are required to file a document with a secretary of state or similar office.
Reporting companies must report the following information to FinCEN about each beneficial owner that isn’t a US person and each company applicant:
Full legal name
Date of birth
Current residential address
Unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of such document)
The law identifies the following forms of documentation as being acceptable for identification:
A non-expired US passport
A non-expired state-issued driver’s license
A non-expired identification document issued by a state, local government, or Native American tribe
A non-expired foreign passport if the individual lacks the above
Company applicant
A “company applicant” is the individual who files the document that first registers the entity to do business in the United States. The regulations also specify that anyone who directs or controls the filing of an entity creation or registration document by another would also be a company applicant. The interim final rule still requires reporting companies to report information to FinCEN about company applicants who are US persons.
Other requirements
The Corporate Transparency Act also requires the Secretary of the Treasury to:
Maintain the reported information in a secure, nonpublic database
Take all steps, including regular auditing of the database, to ensure that government authorities accessing beneficial ownership information do so only for authorized purposes
Minimize burdens on reporting companies associated with the collection of beneficial ownership information
Provide clarity to reporting companies concerning the identification of their beneficial owners
Collect information in a way that is reasonably designed to generate a database that is highly useful to national security, intelligence, and law enforcement agencies and federal functional regulators.
Corporate Transparency Act exemptions
The interim final rule exempts all entities created in the US, previously called “domestic reporting companies,” and their beneficial owners from BOI reporting requirements. The CTA also specifies that certain types of entities are exempt. For example, large operating companies are exempt. These include businesses that have at least one physical office in the US, employ more than 20 people in the US on a full-time basis, and earn at least $5 million in revenue per year. Other exemptions include:
Securities reporting issuers
Governmental authorities
Banks
Credit unions
Depository institution holding companies
Brokers or dealers in securities
Securities exchanges or clearing agencies
Other Exchange Act registered entities
Investment companies or advisers
Venture capital fund advisers
Insurance companies
State-licensed insurance producers
Commodity Exchange Act registered entities
Accounting firms
Public utilities
Financial market utilities
Pooled investment vehicles
Tax-exempt entities
Entities assisting a tax-exempt entity
Large operating companies
Subsidiaries of certain exempt entities
Inactive entities
The CTA also specifies a number of individuals whose information is exempt from being reported, including:
US persons, which includes US citizens, residents, trusts, estates, and business entities created or organized in the US or under US law
Minor children when a parent or guardian’s information is reported
Agents, custodians, intermediaries, and nominees working on behalf of the business or other individuals
Employees of the business whose control over a business or economic benefit is derived solely from their employment status
Individuals with rights of inheritance to a corporation, limited liability company, or other similar entity
A creditor to the business, unless they specifically meet the definition of a beneficial owner
When does the Corporate Transparency Act go into effect?
The Corporate Transparency Act first went into effect on January 1, 2024, while the interim final rule went into effect on March 26, 2025.
FinCEN's registry and reporting mechanisms are fully operational, so businesses subject to the law’s reporting requirements can immediately begin reporting their beneficial ownership information. All reporting companies should have a plan in place to ensure compliance.
How long does a company have to file a report under the CTA?
The timeframe for reporting beneficial ownership information varies depending on when the business was created.
Companies registered before March 26, 2025 must file BOI reports by April 25, 2025.
New companies have 30 calendar days to file initial BOI reports once their registration is effective.
Additionally, once initial ownership information has been submitted, if any material changes take place, businesses must submit an updated report within 30 days.
Who has access to the CTA’s beneficial ownership database?
Unlike some government registries, the beneficial ownership database created by the Corporate Transparency Act is not public. Access to the information contained in the registry is expected to be tightly controlled.
However, FinCEN has the authority to disclose the beneficial ownership information contained in the registry to certain individuals and entities that request it. This includes:
Federal agencies engaged in national security, intelligence, or law enforcement activity
State, local, and tribal law enforcement agencies
Federal agencies making the request on behalf of certain other entities
Financial institutions complying with customer due diligence (CDD) and Know Your Customer (KYC) requirements
Corporate Transparency Act violations and penalties
If a reporting company willfully* provides (or attempts to provide) false or fraudulent information about its beneficial owners, or otherwise willfully fails to provide information as required, it will be in violation of the CTA. Penalties for such reporting violations include:
A $500 civil penalty for each day the violation is not remedied, not to exceed $10,000;
Not more than two years in prison for the individual who submitted the information; or
Both
*‘Willfully’ means the voluntary, intentional violation of a known legal duty.
Likewise, parties authorized to access beneficial ownership information contained in the registry or provided to the registry are prohibited from disclosing that information to an unauthorized party or using it for an unauthorized purpose. Penalties for unauthorized disclosure or use include:
A $500 civil penalty for each day the violation is not remedied, not to exceed $250,000;
Not more than five years in prison for the authorized individual; or
Both
If the unauthorized disclosure took place as a part of any other crime, maximum penalties are doubled to $500,000 and 10 years in prison.
Prepare for the Corporate Transparency Act with Persona
With the CTA’s reporting requirements now in effect, businesses subject to these requirements should have a plan in place for how they will comply. Given that you should already know who your beneficial owners are, you can use Persona to collect, verify, and safely store their relevant information. With reporting pathways now open, you can then submit that verified information to FinCEN.
Interested in learning more? Start for free or get a demo today.
What is a beneficial owner under the Corporate Transparency Act? Toggle description visibility
The Corporate Transparency Act specifically defines a beneficial owner as anyone who exercises “substantial control” over a business or who controls at least 25% of said business.
What is “substantial control” of a company? Toggle description visibility
FinCEN has identified four key ways that an individual can exercise substantial control over a company, including:
Being a senior officer, such as the company’s president, CEO, CFO, COO, general counsel, etc.
Being an important decision-maker for the company, including for decisions regarding the organization’s business, finances, or structure
Having the authority to appoint or remove certain officers or a majority of directors
Any other individual with any form of substantial control over the company
Who enforces the Corporate Transparency Act? Toggle description visibility
The beneficial ownership registry established by the Corporate Transparency Act is maintained by FinCEN, which is also the U.S. government agency responsible for enforcing the law’s compliance.