Start-Ups And The CTA: Substantial Control

In an attempt to combat money laundering and criminal activity, the Corporate Transparency Act (the CTA), recently passed by the U.S. Congress, has made waves because of its onerous and consequential regulations. The CTA requires certain businesses to report beneficial ownership information (BOI) on persons deemed to be "Beneficial Owners" to the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN). Failure to comply with the CTA can result in heavy civil penalties and criminal penalties of up to two years imprisonment. Importantly, if an individual director, investor, or employee — who is a Beneficial Owner — has not complied with the CTA, the company and its senior officers may be held liable for the violation.