Antonio Gastélum
Dually licensed in Mexico and Texas, Antonio helps clients with international estate and business planning.

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The Corporate Transparency Act (CTA) has been called the most significant update to U.S. anti-money laundering laws since the USA PATRIOT Act was passed in 2001. Companies are not required to comply with CTA reporting until January 2022, but planning ahead is strongly encouraged. This legislation could have a significant impact on the activities of Mexican and Latin American investors doing business in the United States.

Types of Reporting Entities

The CTA was written primarily to target foreign-owned shell companies, but the definition is broad enough to include a number of entities operating within the U.S. This includes:

  • Corporations
  • Limited liability companies
  • Any other similar entity that is formed pursuant to the laws of a state or under the laws of a foreign country but is registered to do business within the United States

General partnerships created under state law without the filing of formation documents with a secretary of state or similar office would seem to fall outside the originally expected scope of reporting companies under the CTA. However, they could be included if existing Financial Crimes Enforcement Network (FinCEN) customer due diligence (CDD) rules are more closely followed.

On a similar note, trusts that are not statutory business trusts that have been created by filing with a secretary of state or similar office should not be subject to CTA reporting requirements.

Other notable exclusions to the reporting entity requirements include:

  • Churches, charities, and nonprofit organizations
  • Companies that have a physical presence within the United States, more than 20 employees, and annual gross receipts or sales of more than $5 million
  • Companies in certain industries already subject to significant regulation, such as banks, credit unions, pooled investment vehicles, and registered brokers or dealers

Obligations of Reporting Entities

If a company is considered a reporting entity, it must complete a report for FinCEN providing certain types of information about beneficial owners, including their full legal name, address, and ID number. Reports need to be updated on a yearly basis and will be entered into a database used by FinCEN, national security agencies, law enforcement, and financial institutions. Under the CTA, individual states are not required to maintain a separate beneficial ownership information registry.

Work With an Experienced Attorney to Maintain Compliance

Since there are some areas of uncertainty associated with the CTA, it's strongly recommended that you consult an experienced international business planning attorney to evaluate your reporting obligations and implement any necessary procedures to report to FinCEN in a timely fashion. Contact MEG International Counsel to schedule a consultation.

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