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The Financial Crimes Enforcement Network (FinCEN) has issued a scam alert related to the Corporate Transparency Act. It is crucial that business owners take steps to avoid becoming victims of this fraudulent attempt to solicit information. Our North Carolina business attorneys discuss the scam alert in this blog and how to avoid being tricked.
Fraudulent Attempts to Secure Information Using the Corporate Transparency Act
According to FinCEN, officials have been notified that individuals and businesses who may be subject to the reporting requirements of the Corporate Transparency Act (CTA) could be the targets of scammers trying to solicit information fraudulently. Fraudulent correspondence is being sent to these entities and individuals asking them to scan a QR code or click on a URL. The correspondence may be entitled “Important Compliance Notice.”
FinCEN states it does not send unsolicited requests for information required under the CTA. The letters and emails are fraudulent. If you receive one of these fraudulent letters or emails, FinCEN advices you not to respond to the message. Furthermore, it states that you should not scan QR codes or click links in the messages. Contact the FinCEN or your attorney if you have any questions.
Businesses and owners must be cautious when responding to requests for private information about their owners, employees, or customers/clients.
What Is the Corporate Transparency Act?
The CTA was enacted in 2021 to obtain ownership information for businesses. The goal is to use the information to combat illegal activity, such as money laundering, tax fraud, and financing for terrorism. The FinCEN began accepting reports under the CTA on January 1, 2024.
Under the CTA, businesses that meet specific criteria are required to report information about the individuals who control or own the company (i.e., beneficial owners). It is estimated that millions of companies will be required to report beneficial ownership information according to the law.
Beneficial owners are defined as:
- Individuals who directly or indirectly own 25% or more of the company; OR,
- Individuals with substantial control of the company, such as being senior officers, directing the company, or having removal and appointment authority.
The company must report information about the beneficial owners. Information includes the beneficial owners’ names, addresses, dates of birth, and identification numbers. The companies must also report information about the company, including the name, address, and employer identification number (EIN).
It is essential to gather and verify information for each beneficial owner. The information must be correct and up-to-date. Developing a compliance process, including designating a reporting representative, can avoid late or incomplete filings.
The CTA has civil and criminal penalties for failing to comply. Therefore, owners and companies need to be aware of reporting requirements and deadlines. Consulting an attorney experienced in corporate law and compliance can also be extremely helpful during this process.
Contact Our North Carolina Business Attorneys for a Consultation
If you have questions about your reporting requirements under the Corporate Transparency Act or other compliance requirements, contact our North Carolina business attorneys at Patrick, Harper, & Dixon, LLP. Our attorneys assist companies and business owners with legal and regulatory compliance issues. We can also help you with other business-related matters, including mergers, acquisitions, and litigation.
