Sean Nolan and Joe Struble outline how the introduction of the new Corporate Transparency Act will impact Irish companies operating in the US
Irish companies with business ties to the United States are now subject to new regulatory requirements under the US Corporate Transparency Act (CTA) 2021, which took effect on 1 January this year.
This new legislation imposes stringent reporting obligations on both US and foreign companies, including those from Ireland, as part of a broader effort to combat financial crimes such as money laundering and terrorist financing.
The legislation, while US-based, has significant implications for Irish businesses due to the global nature of modern commerce and close economic ties between Ireland and the US.
The CTA also applies to individuals who own investment properties in the US through investment companies.
What is required?
The CTA mandates that all companies, including foreign entities registered to do business in the US, file a beneficial ownership information report with the Financial Crimes Enforcement Network's (FinCEN) new Beneficial Ownership Secure System (BOSS).
This system is designed to increase transparency by disclosing the identities of the beneficial owners of companies, thereby reducing the potential for illicit activities facilitated through corporate anonymity.
We are seeing a surge in requests for compliance assistance from Irish businesses uncertain about their obligations under the new US law.
This emphasises the importance of compliance given the severe penalties for non-compliance, which include a daily default penalty of US$500 and potential imprisonment.
Compliance burden
The legislation reflects a strong commitment by law enforcement agencies in both Ireland and the US to tackle financial crime.
It also introduces a significant compliance burden for legitimate businesses, however, which must now ensure they are fully prepared to meet these new requirements.
For entities formed in 2024, the deadline to file their BOI reports is within 90 days of formation. Entities formed before 2024 have until 1 January 2025 to file.
The required information includes detailed personal data about the beneficial owners, such as names, addresses, dates of birth and identifying numbers from documents like passport or driver’s licence.
The BOSS database will be accessible to various US agencies, including those involved in national security, intelligence and law enforcement, as well as to state and local and enforcement agencies with court authorisation.
This broad access aims to enhance the US government's capabilities in preventing, detecting and prosecuting international crime and terrorism.
CTA filing requirements
For Irish-owned companies operating in the US, analysing the CTA filing requirements and preparing an initial filing for a foreign-owned company can be complex.
This is because of the limited availability of exemptions and the challenges in documenting beneficial ownership.
The new Corporate Transparency Act aligns with several aspects of the European Union’s directives aimed at preventing money laundering and terrorist financing, which have been part of Irish law since 2016.
The Act represents a significant shift towards greater corporate transparency and could set a precedent for future legislation in other jurisdictions, impacting global business operations.
The implications of non-compliance could extend beyond financial penalties, potentially complicating future business dealings in the US due to criminal records against company owners or principal shareholders.
Sean Nolan is a partner with Clark Hill in Dublin and Joe Struble is a corporate attorney with Clark Hill in San Antonio in the US
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