The CTA was included in the annual NDAA to provide the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) with greater overview of millions of shell companies which are perceived to be troubling. It does so by creating a beneficial ownership registry within FinCEN, requiring millions of "reporting companies" to report information on their "beneficial owners" to FinCEN. The purpose of the registry is to "crack down on anonymous shell companies, which have long been the vehicle of choice for money launderers, terrorists, and criminals."
There has been some concern about the implications and burdens on advisers and funds. As reported in the Ropes & Gray article, the "CTA’s reach is broad, and for the first time targets private investment funds, mutual funds, and their advisers. More generally, the CTA targets LLCs and corporations registered in any state, or formed under the law of any foreign country but registered in the United States to conduct business. Although the legislation seemingly creates an added burden for funds and their advisers, it contains several exemptions aimed specifically at funds and advisers that will relieve funds and advisers from these obligations." The exemptions arise from the fact that investment companies, SEC-registered advisers, private funds, and venture capital fund advisers all have registration requirements.
Please be sure to review the legislation in addition to the articles below.
National Defense Authorization Act for Fiscal Year 2021: https://www.congress.gov/bill/116th-congress/house-bill/6395/text
- Venable: Congress Passes Corporate Transparency Act Creating Expansive Beneficial Ownership Registry with Significant Implications for U.S. and Foreign Business (Dec. 15, 2020)
Ropes & Gray: Sweeping Anti-Money Laundering Legislation Requires Registration with FinCEN
(December 24, 2020)
Ropes & Gray: Corporate Transparency Act Introduces New Reporting Requirements for Investment Funds and Advisers
(March 12, 2021)---->this is the most salient article!