The Financial Crimes Enforcement Network (“FinCEN”) has published a Small Entity Compliance Guide (the “Guide”) for beneficial ownership information (“BOI”) reporting under the Corporate Transparency Act (“CTA”), as well as updated FAQs regarding CTA compliance.

The Guide contains six chapters and an appendix. It is 56 pages long. It appears to be useful to its apparent target audience, which is small businesses confronting relatively simple issues under the CTA. The Guide is relatively clear, simply-worded and contains helpful infographics. However, what neither the Guide nor the updated FAQs does is provide any real insights into how to interpret the BOI reporting regulations. Rather, they reiterate the existing BOI regulatory requirements. Thus, anyone looking for insights into nuanced CTA issues will be disappointed.

The CTA takes effect on January 1, 2024. On that date, FinCEN needs to have implemented a working data base to accept millions of reports by newly-formed companies required to report BOI under the CTA, as well as reports by the even greater population of existing reporting companies, which must report their BOI by January 1, 2025. This is a logistically daunting task, because FinCEN estimates that over 30 million entities will need to register by the 2025 date. Perhaps one of the most interesting things about the Guidance is that it clearly asserts that the January 1, 2024 date is good, and that the CTA BOI database will be functioning by then.

That claim is debatable. FinCEN still needs to issue important and basic regulations implementing the CTA, including final rules regarding access to the data base, and proposed rules regarding how the existing Customer Due Diligence (“CDD”) Rule applicable to banks and other financial institutions might be amended – and presumably, expanded – to align with the different and often broader requirements of the CTA. Further, FinCEN’s notice and request for comment regarding FinCEN’s proposed form to collect and report BOI to FinCEN was criticized roundly. Given the backlash, FinCEN now is revising the proposed reporting form.

Similarly, on June 7, 2023 four members of the U.S. House of Representatives (the Chairpersons of the House Committee on Financial Services; the House Committee on Small Business; the House Subcommittee on  National Security, Illicit Finance, and International Financial Institutions; and the House Subcommittee on Financial Services and General Government) sent a letter directed to Janet Yellen, Secretary of the Treasury, and Himamauli Das, Former Acting Director of FinCEN, regarding the status of the implementation of the CTA. The letter, fairly or not, stresses the need for transparency by FinCEN, and implies that January 1, 2024 may not be a viable date.

The fact that FinCEN devoted its limited resources to producing a 56-page publication which repeats but does not explicate current regulatory requirements for BOI reporting is unusual, given FinCEN’s many other pressing demands – such as finishing the rest of the regulations under the CTA. However, it is possible that the Guide is a reaction to demands placed upon FinCEN by certain members of Congress, who are pushing for clarity for affected businesses.

The Guide:  Reporting Company

With the above caveats in mind, we now summarize the Guide. As noted, the Guide does not appear to provide additional substantive insight. Rather, it attempts to render existing regulatory requirements more accessible. For example, the Guide includes the following chart regarding the definition of a “reporting company” required to comply with the CTA:

The nuanced question to which this seemingly simple chart references, but does not expand upon, is precisely when an entity “may” be a reporting company covered by the CTA. However, the Guidance later provides a relatively useful set of questions for entities to consider as to whether they qualify as one of the 23 entities which the CTA explicitly exempts from its coverage.

The Guide:  Substantial Control

The Guide also offers the following graphic regarding the issue of “substantial control” under the CTA. This is one of the thorniest issues under the CTA, given the incredible breadth of the term.

Many notable commentators have bemoaned the breadth of the vague “substantial control” prong under the CTA, in contrast to the CDD Rule, which requires entities to identify only a single “control person.” For example, Jim Richards has suggested, satirically, that his favorite bartender could qualify under the CTA as a beneficial owner of his AML consulting company, given his “substantial influence” over “important decisions” being made by Mr. Richards.

The Guide:  Ownership

Similarly, the Guide provides this graphic regarding the “ownership” prong of beneficial ownership. Although the ownership interest is cabined concretely to a 25% interest, similar to the CDD Rule, the below graphic illustrates how expansively such interests may be considered:

Similar to the issue of companies exempted from the definition of reporting companies, the Guide also contains a series of yes-or-no questions regarding ownership interests under the CTA.

The FAQs

FinCEN has updated its FAQs on the CTA, first published in March 2023. Unfortunately, like the Guide, the updated FAQs provide no additional analysis, but rather regurgitate the existing CTA regulatory requirements. They note that the regulations regarding access to the CTA database are still forthcoming, and that FinCEN is still revising the actual CTA reporting form. The FAQs do not mention the regulations regarding alignment with the CDD Rule which FinCEN still needs to propose.

Having said that, FAQ D.6 is notable for certain professionals. It asks, “Is my accountant or lawyer considered a beneficial owner?” Here is the answer, which echoes language from the federal register regarding the final rule:

Accountants and lawyers generally do not qualify as beneficial owners, but that may depend on the work being performed.

Accountants and lawyers who provide general accounting or legal services are not considered beneficial owners because ordinary, arms-length advisory or other third-party professional services to a reporting company are not considered to be “substantial control” (see Question D.2). In addition, a lawyer or accountant who is designated as an agent of the reporting company may quality for the “nominee, intermediary, custodian, or agent” exception from the beneficial owner definition.

However, an individual who holds the position of general counsel in a reporting company is a “senior officer” of that company and is therefore a beneficial owner. FinCEN’s Small Entity Compliance Guide includes a checklist to help determine whether an individual qualifies for an exception.

Likewise, FAQ E.3 asks, “Is my accountant or lawyer considered a company applicant?” Again, the below language echoes verbiage from the federal register:

An accountant or lawyer could be a company applicant, depending on their role in filing the document that creates or registers a reporting company. In many cases, company applicants may work for a business formation service or law firm.

An accountant or lawyer may be a company applicant if they directly filed the document that created or registered the reporting company. If more than one person is involved in the filing of the creation or registration document, an accountant or lawyer may be a company applicant if they are primarily responsible for directing or controlling the filing.

For example, an attorney at a law firm that offers business formation services may be primarily responsible for overseeing preparation and filing of a reporting company’s incorporation documents. A paralegal at the law firm may directly file the incorporation documents at the attorney’s request. Under those circumstances, the attorney and the paralegal are both company applicants for the reporting company.

The FAQ E.3 response re-emphasizes how the CTA can pull lawyers and other professionals directly into its reporting requirements, even if they are not beneficial owners themselves.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch.  Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.


Email this postTweet this postLike this postShare this post on LinkedIn

Related Posts

Hotel attendant opening door (mid section)

Closing the Gate: House Adopts ENABLERS Act Amendment to 2023 NDAA

July 21, 2022

Corporate Transparency Act of 2019 Broadens Beneficial Ownership Reporting

March 28, 2019

Use of Tainted Assets to Pay Attorney Fees: A Primer on the Pitfalls

September 4, 2018Search…SEARCHYour website url


RSS LinkedIn Twitter YouTube


Topics Select Category 18 USC 1956 18 USC 1957 31 USC 5324 Administrative Procedures Act AMLA of 2020 Anti-Money Laundering (AML) Art and Antiquities ATMs Attorney Client Privilege Attorney Liability Bank Bank Fraud Bank Secrecy Act (BSA) Basel AML Index Beneficial Ownership BIS Bling Blockchain Analytics Bribery Broker Dealer BSA AML Reform Bulk Cash Smuggling Casino Check Casher Civil Liability to Private Parties Civil Penalty Commodity Futures Trading Commission (CFTC) Compliance Program Conference of State Bank Supervisors (CSBS) Conspiracy Consumer Financial Protection Bureau Corporate Transparency Act Correspondent Bank Accounts COVID-19 Credit Union Criminal Enforcement Currency and Monetary Instrument Report (CMIR) Currency Transaction Report (CTR) Customer Due Diligence Cybersecurity De-Risking Dealers in Jewels, Precious Metals or Stones Deferred Prosecution Agreement DeFi Department of Justice (DOJ) Department of State Elder Abuse Electronic Funds Transfer Environmental Crime ESG European Union Examination Export Controls Extraterritorial Application of US Law FBAR Federal Deposit Insurance Corporation Federal Reserve FFIEC Fifth Amendment Financial Action Task Force (FATF) Financial Crimes Enforcement Network (FinCEN) FINRA Fintech Foreign Account Tax Compliance Act (FATCA) Foreign Corrupt Practices Act (FCPA) Forfeiture Form 8300 Fourth Amendment Freedom of the Press Geographic Targeting Order (GTO) Gold and Precious Metals Grand Jury Investigation Human Trafficking Identity Theft Illegal Wildlife Trade Independent Testing Individual Liability Information Sharing Intent to Conceal Intent to Evade a Reporting Requirement Intent to Promote Internal Investigations Internal Revenue Service (IRS) International Tax Evasion Investment Advisors Investor Suits Kingpin Act Know Your Customer (KYC) Marijuana Industry Mixers Money Services Business Money Transmitter Mortgage Banking MSB Mutual Legal Assistance Treaty (MLAT) Narcotics Financing National Credit Union Administration New York Department of Financial Services (NYDFS) NFTs Nonbank Lender Not-For-Profits Office of Foreign Assets Control (OFAC) Office of the Comptroller of the Currency (OCC) Offshore Account Organization for Economic Cooperation and Development (OECD) PANA Panama Papers Pandora Papers Paycheck Protection Program payment processors Plea Agreement Prepaid Account Provider Proceeds Racketeer Influenced and Corrupt Organizations Act (RICO) ransomware Real Estate Record Keeping Report of Foreign Bank and Financial Accounts Risk Assessment Section 311 of USA Patriot Act Securities and Exchange Commission (SEC) Sentencing Sexual Exploitation Specified Unlawful Activity State Enforcement Structuring Suspicious Activity Report (SAR) Tax Fraud Technological Innovation Terrorism Financing Third-Party Relationships Title Insurance Tracing Trade Based Money Laundering Training Transaction Monitoring Travel Rule Trusts Uncategorized Undercover Investigations USA PATRIOT Act Virtual Currency Voluntary Disclosure Whistleblower 


Archives Select Month  September 2023   August 2023   July 2023   June 2023   May 2023   April 2023   March 2023   February 2023   January 2023   December 2022   November 2022   October 2022   September 2022   August 2022   July 2022   June 2022   May 2022   April 2022   March 2022   February 2022   January 2022   December 2021   November 2021   October 2021   September 2021   August 2021   July 2021   June 2021   May 2021   April 2021   March 2021   February 2021   January 2021   December 2020   November 2020   October 2020   September 2020   August 2020   July 2020   June 2020   May 2020   April 2020   March 2020   February 2020   January 2020   December 2019   November 2019   October 2019   September 2019   August 2019   July 2019   June 2019   May 2019   April 2019   March 2019   February 2019   January 2019   December 2018   November 2018   October 2018   September 2018   August 2018   July 2018   June 2018   May 2018   April 2018   March 2018   February 2018   January 2018   December 2017   November 2017   October 2017   September 2017   August 2017   July 2017   June 2017   May 2017   April 2017   March 2017   February 2017   January 2017  



Money Laundering Watch

by the White Collar Defense/Internal Investigations Group at Ballard Spahr LLP


Peter D. Hardy


RSS LinkedIn Twitter YouTubeDisclaimerPrivacy Policy


Ballard Spahr’s Anti-Money Laundering Team represents a broad range of financial institutions.  We help clients establish and refine AML policies and procedures; prepare for and respond to regulatory exams; conduct due diligence for lending and acquisitions; and conduct internal investigations and respond to administrative, civil or criminal investigations, government enforcement actions, and related civil ligation by private parties.Copyright © 2023, Ballard Spahr LLP All Rights Reserved.

www.ballardspahr.comLaw blog design & platform by LexBlog