BBB: How to comply with new Corporate Transparency Act — and avoid scammers

As the new year approaches, businesses should prepare for significant regulatory changes.

While additional paperwork may not be appealing, adhering to the Corporate Transparency Act offers numerous benefits.

Compliance fosters trust, enhances business credibility, and ensures regulatory adherence. It promotes accountability, deters financial crimes, and attracts investors by demonstrating a commitment to transparency. By following these guidelines, businesses can strengthen their reputation, reduce legal risks, and contribute to a fair and ethical marketplace.

The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, introduces significant reporting requirements for many businesses in the United States. While aimed at increasing corporate transparency to combat financial crimes, the law also presents potential risks for scams and misinformation. Many business owners must be prepared to meet these obligations and safeguard themselves against fraud.

Small businesses are the primary target of these new requirements, so it is critical to understand your responsibilities. First, identifying who the new regulations apply to. The entities registered prior to Jan. 1, 2024, have to file the report by Dec. 31, 2024.

Entities registered on or after Jan. 1 have only 90 days to file their report. Those entities registered on or after Jan. 1, 2025, have only 30 days to file the report. Those reports include a Beneficial Ownership Information Report with the Financial Crimes Enforcement Network (FinCEN). This report discloses information about individuals who own or control the entity.

While that includes millions of businesses, the rule exempts mostly larger companies with more than 20 full-time employees and more than $5 million in annual gross revenues, and a physical office building from which it conducts its business that is unshared by other businesses. It also includes certain regulated entities, like banks and insurance companies as well as publicly traded companies.

For those needing to comply, preparing yourself ahead of time will help you stay organized as you prepare. Business owners must file a report containing Identifying information about the entity, such as its legal name, address, and formation details. Also the companies’ FEIN, and owner identification information such as driver’s license, or unexpired passport must be uploaded to the FinCEN Portal.

Those details about beneficial owners, include names, birth dates, residential addresses, and unique identifying numbers. Also, penalties have been set up. Failure to report or providing false information can result in civil and criminal penalties, including fines up to $500 per day of noncompliance and possible imprisonment.

With such personal and valuable information involved, we urge you to be on guard for potential scams and misinformation that can lead to cyberattacks and loss of key personal and business information.

BBB fully expects that scammers may exploit confusion to target small business owners. Common tactics include fraudulent compliance services. Scammers might pose as official agencies offering to complete CTA filings for a fee. Also be on the alert for and inform any employees of potential phishing emails. Fraudsters could send emails impersonating FinCEN or other agencies, asking for sensitive information.

Fraudsters love deadlines and possibly challenging details to fill out forms correctly. It would be expected they will launch a series of misinformation campaigns. Incorrect details about exemptions or deadlines may circulate, causing businesses to miss deadlines or fall prey to fraud.

It’s vital during this period as a business owner to stay informed and protect yourself and your company’s important information. Use official sources. Ensure that you rely on government websites, such as FinCEN’s official site, for accurate information.

We always urge that you verify communications and always double-check the sender’s credentials before sharing sensitive details. FinCEN does not request reports or fees via email.

Never hesitate to consult trusted advisers. Work with your accountant, attorney, or business adviser to ensure compliance, and if you have questions look up agencies and contact them directly. Phishing emails or texts often contain fake phone numbers and links that put you right in the hands of those scheming to steal money and information.

As always, report any scam attempts, even if you did not lose money, it helps raise the awareness to make the marketplace safer for your fellow citizens and businesses.

• Steve J. Bernas is president and CEO of the Better Business Bureau and can be reached at sbernas@chicago.bbb.org.