Combating Money Laundering and the Financing of Corrupt and Illicit Activities: The Corporate Transparency Act of 2021

23 Wake Forest J. Bus. & Intell. Prop. L. 189.

On January 2, 2021, some of the most significant amendments to the United States anti-money laundering (“AML”) regime became law when the Senate overrode former President Trump’s veto of the National Defense Authorization Act of 2021 (“NADA”). NADA includes the Anti-Money Laundering Act of 2020, which dramatically changes current AML legislation, including the Bank Secrecy Act (“BSA”). The AML Act includes the Corporate Transparency Act (“CTA”) of 2021, which requires certain entities to disclose their beneficial ownership information. The purpose of the CTA is to combat the variety of bad actors who use anonymous shell companies to hide and move funds associated with corrupt and illicit activity. However, critics of the CTA claim that it is an invasion of privacy and creates an administrative burden on small, legitimate companies.

This comment will focus on the implications of the Corporate Transparency Act of 2021. The background section discusses the events leading up to the enactment of the CTA, and the analysis section addresses the impact of the CTA. The background section discusses three different aspects of the CTA: (A) illustrates how the initial proposed legislation was altered to eventually become the current CTA, (B) explores the potential interplay between the CTA and existing legislation regarding beneficial ownership information, and (C) analyzes privacy concerns and the burden on small businesses due to the CTA. Finally, the analysis section will: (A) suggest changes and clarifications that need to be made to the CTA and (B) explain why these changes and clarifications are necessary. Part (A) proposes the following terms be clarified: (1) reporting company, (2) beneficial owner, and (3) applicant. Part (A)(4) recommends the safe harbor provision be clearer. Part (A)(5) suggests that beneficial ownership information being reported should be verified.

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